Kevin AmolschThe $14,000 Conversation That Almost Didn’t Happen
“Sure, we can do that. I have the approval,” my tenant’s representative told me in a very brief phone conversation. This tenant is an important company in one of my buildings. The term of their lease is coming up, but they have three additional renewal options. Each one is to extend the term for three additional years, so they control their space for the next nine years, assuming they want to continue to renew. As the current term was coming close to the end, they sent my property manager a note indicating their intent to renew but wanting to eliminate some unneeded space. The amount of rent I would lose is about $14,000 per year.
This request caught me off guard, and the way they asked felt more like a demand than a request. It is important that we keep the company happy as our anchor tenant, but I did not read anywhere in the lease that they can change their footprint, or any other term in the lease, upon a renewal. The lease says they have the right to renew or not renew under the current terms. I wanted to push back, but I was nervous.
I ended up asking my property manager for contact information for the company or their attorney, and reached out via email asking for a call.
Knowing the delicacy of the looming conversation, I was a bit nervous and was advised to give the company what they wanted. Losing $14,000 per year is a lot better than losing the tenant. I understood the advice, but thought maybe I could just ask them what they thought about some compromise so we would both be happy. I jumped on the call at our scheduled time, and it went far better than expected. She understood our position. I told her it caught me off guard and that I did not think it was possible to renegotiate terms upon exercising a renewal option, and asked her what she thought. She explained the company’s position but stated she would renew and suggested we do that to give us more time to negotiate. We agreed to discuss releasing them from that portion of the lease with the next renewal in three years. I took the opportunity to ask her if they would be willing to sign a longer-term lease if we released the unneeded space, and she thought that was a good idea.
As I was listening, the only thing I could think of was getting off the phone. I was as silent as I could be and got off the phone quickly. She said they would renew the current terms, so there was no need to continue talking and risk the final result.
As I went through this process, I felt it was a great reminder and a solid lesson that the answer is always “no” if I don’t ask… so I might as well ask. If you face challenging situations like this, I encourage you to do what you would encourage your kids to do and ask those tough questions. You never know what might happen.
