1. Managing Lease
Renewals
Presented By:
Jerry King
Rent Research Consultants, Inc.
Lease Administration Masterclass Friday, 23rd March 2012

2. There’s Real Money Here
• 600 Stores of 5,000 Square Feet
• Five years Leases @ $14.00 PSF
• 20% Roll over each year
• 40% Exercised—60% Re-negotiated
• 50% Success Rate
• Average 8% Rent Reduction
• Over One Million Dollars Per Year Savings
Lease Administration Masterclass Friday, 23rd March 2012

3. Getting Ready to Start !
• Key decisions
– Who is In-house contact?
– Should I Outsource the project?
– What will the program cost?
– How do I Interface with store
operation?
– What are the Accounting
concerns?
– What are the Reporting
requirements and to who?
– What are the Field notification
Issues?
– Who will prepare the
Documentation ?
Lease Administration Masterclass Friday, 23rd March 2012

4. Work Flow -Summary
1. Gather Store/Lease Information
2. Refer to Operations for Decision
3. Gather market information
4. Evaluate Information
5. Issue written recommendations
6. Back to Operations for final decision
7. Exercise Option or set up for
negotiation
8. Negotiate with landlord
9. Landlord and Operations sign-off on
deal
10. Prepare documentation
11. Track documentation to fully
executed
12. Update Lease Abstract
Lease Administration Masterclass Friday, 23rd March 2012

5. Work Flow Step 1
Gather Information
• Gather Store Information on Upcoming
Option/Renewals
– Option Notice Date and LED
– Store Manager Interview
– Date and rental history
– Landlord information
– Premises information
– Store sales last three years
– Amortization status
Lease Administration Masterclass Friday, 23rd March 2012

6. Work Flow Step 2
Renew or Not Renew Decision
• Obtain Decisions
– Store Size
– Length of Extension?
– Maintenance Problems?
– CAM Problems?
– Signage?
– Sales projections?
• Minimum Rent vs.
Percent Rent?
– Other Lease Issues?
Lease Administration Masterclass Friday, 23rd March 2012

7. The Site Visit
• Actual Site Visit
– Pictures of site including . . .
– Drive trade area
– Broker signs
• Virtual Site Visit
– Google Earth and Bing.com
– Assessors website
netroonline.com
Vision Appraisal
– Landlord’s website
– Community Walk
Lease Administration Masterclass Friday, 23rd March 2012

8. Work Flow Step 3
Real Estate Rental Information
• Rental & Vacancy Rates
– Subject Site
– Competing sites
• Landlord Information
• Photographs and Websites
• Competition & sales
• Construction
– Public
– Private
• Look for Change
Lease Administration Masterclass Friday, 23rd March 2012

9. Work Flow Step 5
Evaluate Information
• Rank by importance
• Rank by source
– Single source information
– Multiple source information
– First Hand vs. second hand
– LIS, Map Info, Spectrum
– Broker / Agent Comparables
• Collaboration
• Test validity
• Evaluate Timeliness
Lease Administration Masterclass Friday, 23rd March 2012

10. EXERCISE OPTION OR
PASS
• Risks
– Loss of store
– Competitor takes your
old store
– Landlord demands
higher rent
• Rewards
– Lower rent
– Higher Success Rate
– Strong opening
negotiating position
Lease Administration Masterclass Friday, 23rd March 2012

11. Option Exercise Criteria
• Operational concerns
– Market Penetration
– Location of Competitors
• Market rent Variance
• Vacancies in trade area
• New Competition in trade area.
• Competitors Leaving Area
Lease Administration Masterclass Friday, 23rd March 2012

12. Work Flow
Draft Written Report
• Try to limit to Two Pages
• Should have at minimum
– Current Status
– Key Findings
– Conclusions
– Recommendations
– Negotiation Goals
• Circulate to Operations
Lease Administration Masterclass Friday, 23rd March 2012

13. COMPLETE THE
NEGOTIATION
• Choose Your Negotiator
• Setting reasonable
goals
• Pre-negotiation
concessions
• Timing is the key
• Opening proposals
• When to quit
Lease Administration Masterclass Friday, 23rd March 2012

14. Opening Position
Requirements
 Create Doubt that you
are staying
 Reveal a reasonable
alternative
 Be based on facts of
which Landlord is
aware.
 Offer solution to your
problem.
 Be almost reasonable.
Lease Administration Masterclass Friday, 23rd March 2012

15. Sample Letter
RE: XYZ Corp Store #xxxx City, ST
Dear Landlord (where possible this should be personalized):
As you are aware, the economy is slowly recovering from the worst recessionary
period of our generation. However, in many respects, the future holds a great deal
of uncertainty as the country and economy continue to navigate this period of
transition. If securing a strong creditworthy Tenant during this time of transition is
of interest to you and your organization, XYZ Corp is implementing a corporate
initiative offering Landlords the opportunity to secure an early extension of its
lease in exchange for a reasonable restructuring of the lease terms.
We will be contacting you shortly to discuss specific lease modifications. We
respectfully request that you respond to them expeditiously regarding this
opportunity which should benefit both parties.
In the interim, if you have any questions, please do not hesitate to contact us directly
at (xxx) xxx-xxxx. Thank you.
Lease Administration Masterclass Friday, 23rd March 2012
Sincerely,

16. Negotiating the Issues
• Use multiple issues
• Timing of the
negotiation
• Use NPV evaluation
• Incorporating new
lease clauses
• Pre and Post
Conditions
Lease Administration Masterclass Friday, 23rd March 2012

17. DEAL SIGN-OFF
• Prepare Deal Memo
– Simple LOI
• Commits Landlord
to new deal
• Commits Operations
to new deal
• Stops wiggle
• Stop Nibbling
Expanding Knowledge...Best Practices 2010
Lease Administration Masterclass Friday, 23rd March 2012

18. PREPARE
DOCUMENTATION
• Lease Amendments
• Letter Agreement
• Who’s Drafting
• Obtaining last minute
concessions
• Typical Add-ons
– Self Help
– Notice Clauses
– Remodel Rights
Lease Administration Masterclass Friday, 23rd March 2012

19. Track Document until Fully
Executed
Remember Jerry’s Rules
1. From the time the deal is made
until it is signed there is
nothing good that can happen.
2. Once the deal is signed there is
nothing bad that can happen.
3. People who understand 1 & 2
are called deal makers.
4. People who don’t understand
rules 1 & 2 are called
unemployed.
Lease Administration Masterclass Friday, 23rd March 2012

20. Communications
• Update Lease
Abstract
– Paper file
– Lease Administration
Software.
– Memo’s to all
– Thank you letter to
Landlord
Lease Administration Masterclass Friday, 23rd March 2012

21. How you made your first Million
1. Gathered Store/Lease Information
2. Sent it to Operations for Decision
3. Gathered market Data
4. Evaluated the Information
5. Wrote a Report
6. Back to Operations for final decision
7. Decided to re-negotiate the option
8. Negotiated with landlord
9. Got both Landlord and Operations sign-off
10. Prepared documentation
11. Tracked documentation until it was fully
executed
12. Update Lease Abstract
13. Got HUGE BONUS for a job well
done.
Lease Administration Masterclass Friday, 23rd March 2012

22. SO BUILD YOUR OWN
PROGRAM
• BUILD A TEAM
– In-house Team
– Out-source team
• SET UP PROCEDURES
• NEGOTIATE
• DOCUMENT YOUR
SAVINGS
Lease Administration Masterclass Friday, 23rd March 2012

23. Contact Information
Jerry King
• jking@rent-research.com
• www.rent-research.com
• Rent Research Consultants,
Inc. PO Box 372
Swansea, MA 02777, USA
• Phone 1-866-635-5762
• FAX 1-888-473-1121
Lease Administration Masterclass Friday, 23rd March 2012