While some landlords say "No!" to tenant requests to renegotiate their leases, many tenants will have a similar reaction to landlord requests to renegotiate leases. In most cases, a tenant's negative reaction is due to an imbalance in the perceived benefits the tenant would derive from a renegotiated lease versus the additional obligations the transaction would create. [IMGCAP(1)]

Multiple reasons exist for a tenant to decline such a transaction, many of which are simply the flip side of the reasons landlords say "No!" 12 reasons why tenant should, and often do, say "No!" to lease renegotiation transactions include:

Insufficient dollar amount of financial incentives offered by the landlord
Structure of financial incentives or other transactional components do not support tenant's business objective
Delayed timing of financial incentives that results in diminished benefit and erodes NPV
Too many restrictions placed on the financial benefits or other elements of the transaction by the landlord or lender
Too long a lease term required by the landlord or its lender to justify other terms associated with the transaction
Inflexibility on the part of the landlord in agreeing to non-financial or other business terms
Lease document is too strenuous or one-sided, favoring the landlord
Lack of faith by the tenant in the landlord's ability to perform or deliver on commitments made, including the landlord's ability to fund construction or service commitments
Concern over lender's willingness or ability to modify or decline renegotiated terms
Tenant's misinterpretation of current market conditions and achievable terms
Unreasonable expectations of the outcome by the tenant
Lack of qualified real estate advice and representation provided to the tenant

Other reasons may exist, as well, as to why tenants would decline the ability to reneogtiate their leases. This is not intended to be complete or all encompassing.

For tenants, it's pretty simple; improve their terms, both financial and non-financial, to a point where it makes sense for them to extend their lease for a term that is commensurate with both the additional benefits they'll derive therefrom and their own non-real estate business objectives. See! Wasn't that simple?

Instant Insights /

12 Reasons Why Tenants SHOULD Say "No!" to Lease Renegotiation Transactions

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