With the economy no longer on a long-term up-and-up, the tenant to landlord to lender relationship has shifted significantly. Lenders are more aggressive to have control over tenant terms and activities, however, this can result in poor business decisions. Here are some tips to navigate these relationships:
Tenants need to join forces with their landlords and vice-versa to ensure that the property and the tenant's business reaches its full potential. Landlords should be clear with tenants that before tenants approach a landlord to exercise an option or extend a lease, they need to demonstrate that they have taken the steps to be ready for this. Landlords need to lend open ears and open doors to tenants to explore options on how they can both work together to improve a property.
Use Your Head
As a landlord, it is important to hear tenants out and provide the help you can to make them happy with their choice of space. However, landlords need to also evaluate these proposed tenant projects with an eye for detail.
- Has the tenant made enough changes in operations to warrant landlord / lender help?
- Does the review of the tenant profits and loss statements look healthy?
- Are there other vacancies or areas in your portfolio that may be better suited for the tenant?
Arrange a Face-to-Face
A major challenge with managing these relationship is the reluctance of lenders to approve build-out projects among tenants. These build-outs have the potential to add value to the property and can lend to the success of the tenant's business. Sometimes, getting the lender to come to terms with these kind of projects can be as simple as arranging a face-to-face meeting between the lender and the tenant. Allowing the tenant to argue their case for the lender can often put a personal emphasis on the project that could help sway towards the tenant's favor.
More than ever, tenants and landlords need to establish strong, fluid relationships that help both to benefit.