How mutually favorable terms were identified to achieve a rent reduction.

Situation: 

How do you convince a landlord to give you a substantial rent reduction?

The client had a store that was significantly missing sales expectations, and it worried about future profitability and its ability to maintain rent payments. The center itself was not performing as well as expected (other tenants were in the same boat), so it knew the landlord would be willing to work with them, but it wasn’t sure what to propose as a solution that would be favorable for both parties. The client knew it would have to close if they couldn’t get the rent reduced significantly.

Solution:

A financial and market analysis provided a convincing argument to the landlord to reduce rent.

Brin estimated the break-even rent rate and optimal EBITDA rent rate by utilizing customized pro forma models and data on existing store performance. She then used this information to identify potential new deal terms favorable for both parties, including an alternative rent structure, reducing base rent for the tenant while ensuring potential upside for the landlord through percentage rent.

Result:

The landlord accepted the new terms, and the store stayed open, which ultimately led to success as the center gained traction. The client is estimated to have saved over $1 million in combined rent and alternative loss of capital investment.