Dec
11

Tenant Lease Terms – Are They What They Appear to Be?

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An associate of mine had lunch today with an attorney that does transactional work for national retailers. The attorney stated that their business model has changed as a sign of the times. They are currently working with every one of their national retail clients to renegotiate all leases. All angles are apparently being pursued, including but not limited to, shortened lease term, reduced rental rate, capped expense reimbursements, elimination of percentage rent, etc. It appears to be a national trend.

So, the pro-forma that you are reviewing today (pre-July 2008) may be changing shortly. Appraisers, lenders, brokers and buyers should keep their eyes open and be skeptical; especially if working with a special servicer or the property in question is in foreclosure. The income being generated today, may not be equal to the income received tomorrow……..

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