Report: Less Retailers Getting Rent Breaks

We’ve heard both sides of this story. Many retailers, such as Rite Aid, are pursuing, and say they’re successful, in getting rent reductions from landlords. But some property owners, like Weingarten, are also saying they refuse to budge on concessions.

Now according to one report, landlords are budging less. Said Kenneth Frieze of Gordon Brothers Group in a recent Reuters article: “We’re seeing now that landlords have pulled back some from negotiating.”

Apparently landlords will only negotiate now if a tenant is on the verge of bankruptcy or if the retailer is willing to give something back, like sign a lease extension. Maybe that was some backlash against some supposed large retailers that sent form letters to landlords asking for reductions not matter their stores’ economic performance?

Are rent reductions happening or were landlords not giving them in the first place?

15 Responses to “Report: Less Retailers Getting Rent Breaks”

  1. 1 Sure October 2, 2009 at 10:49 am

    Right… sure… and the unemployment rate is only 9.8%, try 18%.

  2. 2 james October 2, 2009 at 3:05 pm

    Unless the tenant is willing to give something back in the form of a lease extension, or a recapture that makes up for the loss in net present value, the landlord should dig in and enforce the lease vigorously, otherwise he is only negotiating against himself. Rent concessions are not going to “save” a local tenant or franchisee who is struggling, and a national tenant is really making decisions based on the totality of their operation, not on individual locations. Its not good karma for them to renege on individual commitments on weak stores, incurr the litigation and bad rap, and then expect Landlords at strong locations to cooperate, ain’t going to happen. Why provide a lease concession to a company that’s is filing for Chap 11 in any case? The bottom line here is I think strong landlord’s and tenant’s with good locations are finding they can get by, albeit with some serious belt tightening. The weak tenants and landlords are going to go down no matter what concessions are out there and only make things better for those left standing. Its called “Hard Ball Real Estate” a game I know and love so well.

  3. 3 Weed Removal October 2, 2009 at 4:17 pm

    James – As a retailer involved in literally hundreds of one-on-one lease reduction discussions this year, that pervasive old-school posture – self-positioning the LL as Scrooge, not a Business Partner – is counter-productive to Retailing, Development and long-term relationships. Some of us are going to have very long memories. This is a multi-faceted sea-urchin of a discussion, without, I suspect, a Final Answer. I read the Reuters article snickering, counting the accomodations (graciously) received from quotees in the article, thinking I must have gotten the lion’s share…? Really? Seriously, what else do you think they’re going to say (in public)? “Come on in, the water’s fine?” Smart LL’s will make the smart decisions based on individual retailer reputation, attitude, compromise, promise (ne: hope)and the actual financial metrics.

  4. 4 Sure October 3, 2009 at 2:17 am

    The “bad karma” has already come back around to the greedy Landlords who have been gouging tenants for years. Honest Landlords who are on the Tenants side will survive, not the other way around.

  5. 5 Master of Reality October 5, 2009 at 8:25 am

    I work for a national name retail chain that occupies free-standing buildings. Unless we were at the end of a Lease Term, or at the point of decision on exercising an Option, there were no reductions given. With the leverage, we have been able to extract some concessions as long as we could show true economic hardship- and we could in some cases. Other than that, Landlords have all wanted lease term extensions- many times inappropriate for the amount of concession offered.

    Whatever, James. Play your hardball game. It will eventually come back to bite you in the rear end when your tenants leave as soon as they can because of inflated rents that you stuck on them back during the false valuation period. Would you rather have a marginally successful name tenant stick around at a reasonable rent, or have to invest dollars in your property to make it marketable after your tenant eventually leaves? Keep dreaming that you’ll ever get those inflated rents again.

  6. 6 Small Private Landlord October 5, 2009 at 11:27 am

    I can tell you, we are definitely resisting rent reductions HEAVILY. To date, we have terminated one tenant that was requesting a reduction and had quite a few others that have been calling or had bottom feeder brokers calling and sending letters requesting rent relief. As soon as you tell them “I will be glad to hear your case for rent relief and will consider it thouroghly but before I can do so I will need three years worth of operating statements on the store, corporate financials etc.,” they generally have stopped calling. We have given a few small consessions to mom and pops just to string them out further paying something while we try to find a replacement. There are definitely some cases where rent relief is warranted but there are many many more in which the retailer is just fishing for a nibble where they can get it. Stay strong landlords! The more of us that start caving to these requests, the worse it will get for everyone! At the very least, make sure that they REALLY need a rent reduction by examining detailed financials first!

  7. 7 Sue October 5, 2009 at 3:23 pm

    Because of bad press giving tenants the impression that Landlords everywhere are giving concessions, we have been beseiged with tenant requests for concessions. My response to these tenants, most of whom are surviving fine with a little belt-tightening, is that, unless they are willing to give something back of equal value, then why would a landlord give a concession? You don’t see landlord’s going to the tenants when the economy is fluorishing and asking them to pay extra rent, do you? That is the whole purpose of a “lease”. Everybody takes a risk – the tenants take the risk that the lease rates may go down and they will be paying too much and the landlord takes the risk that the market rates will exceed what they are getting under the lease. Where does it say in the lease that “lease rates are subject to renegotiation, depending on the current state of the economy”?

  8. 8 Ladislao October 5, 2009 at 8:36 pm

    So “Sure” where are you getting that 18% unemployment rate? I already know where to find it, but please give us more details. Ahhh, forget it – here it is:

    Try 17% – that’s the actual REAL number. In any case you were much closer than anyone that I’ve seen reply on any of these posts. So congrats on reporting the closer (more real) numbers.

    Also, to our friend “James,” talk about bringing about “bad karma,” don’t you think making statements like – “…“Hard Ball Real Estate” a game I know and love so well.” Isn’t that going to possibly cause some “bad karma” on yourself?

    Thanks Ian for posting this… Later all…

    • 9 james October 6, 2009 at 8:22 am

      The purpose of a legal contract is to bind two parties to an agreement, the parties sign a lease precisely so that their agreement will be memorialized and SURVIVE changing circumstances. I take a huge financial risk when I build or acquire a retail center, I offset that risk by signing binding agreements with tenants. I literally bet on my tenants success by providing TI improvements and paying their Broker, I am not there to sponsor their failure. I am a very tough negotiator on the frontend of the deal, but then I am a pussycat of a Landlord taking excellent care of my tenants and my property. I go way out of my way to do everything I can to hold down CAM costs, Taxes , and Insurance so that my property is as competitive as possible in the market place. I see all kinds of tenants. I have tenants with small businesses who are modest people who have set aside reserves for these hard times, you know what, they are not the people coming to me to ask for concessions. I have other tenants, the so-called high flyers who drive around in their Jaguars, have 40 store locations, have huge debt obligations, no reserves, they are a constant collection problem, and they are the ones who claim I am gouging them, that I am a greedy bastard, and that their wonderful selves DESERVE a rent reduction. Who do think I will actually grant a rent reduction to when it is time?
      I love my version of Hard Ball Real Estate and I intend to keep playing, taking care of my great tenants, and living up to my end of the agreement. No bad Karma will ensue from that.

  9. 10 Ladislao October 6, 2009 at 5:02 pm

    To James:

    You know what’s sad that people like James are playing there cards out as much as they can, and the people who started this are going to be the ones laughing the hardest in the end, or will they? To get a glimpse of who I’m talking about listen to this 4 part audio:


    No matter how you look at this we’re in trouble. Don’t believe me, look at these numbers from a recent (September 2009 report) News quote from Eric Sprott, founder of Sprott Asset Management. The report deals with the US dollar crisis and is entitled “Safe Haven No More”:.:

    US Government Financial Summary

    – US Revenue for 12 months ended August 31, 2009 – $2,157,940,000,000

    – Total Outstanding US Debt (August 31, 2009) – $11,812,870,150,873
    – Unfunded Social Security Trust Fund – $17,500,000,000,000
    – Unfunded Medicare Trust Funds – $89,300,000,000,000

    TOTAL Obligations: $118,612,870,150,873

    Richard Fisher, President and CEO of the Federal Reserve Bank of Dallas, is on record stating that unfunded liabilities from Medicare and Social Security totaled $99.2 trillion as of May 2008.

    Now if you were to just take $118.6 Trillion minus $99.2 Trillion that equals – $19.4 Trillion. That’s how much more in debt we are in only 16 months. That means that as each passing month goes by we are owing as a country $1.39 Trillion EVERY MONTH !!!

    It’s pretty much what Gerald Celente said:
    “Change we can believe in? How about insanity we can see!”

    Hey James remember what you wrote about me a few weeks ago: “as a Big City ex-Detroiter, I have encountered many Ladislao’s in my time. Ladislao = Nut Case.”

    So James, get used to the words – “Tent Cities” and “Ghost Malls”. Try collecting from people that won’t have anything left to give when they have to file BK. We’re heading into some very rough times, that’s unless of course we don’t convert our dollar to the “Amero” first to devalue it even more before we head into a true one world currency. Again, if you still don’t believe me – read this:

    Continue in your quest not seeking out the truth and calling people like myself a “nutcase.” I think that those who ignore this might want to research this information on there own to see if what I’ve posted here isn’t true. But again, this is all just my opinion right?…

  10. 11 Ladislao October 6, 2009 at 5:06 pm

    I made a mistake in my calculation. I said “That means that as each passing month goes by we are owing as a country $1.39 Trillion EVERY MONTH !!!” I was incorrect. I should have said – $1.21 Trillion every month. Again, my mistake…

    • 12 james October 7, 2009 at 8:46 am

      My point is, so what are YOU going to DO about it? This is nothing more than a hiccup in history. Were you all upset about Y2K too? Another blip on the screen of absurdity. Who did we borrow the money from and who do we repay if we can find them, obviously THEY are willing to extent us credit so THEY must think we have the ability to repay them?? What did we use for collateral? How are they going to foreclose and who is their receiver?? What the hell are THEY going to do about our F-18 fighter jets if they try?? Do you really think the whole world will agree that everything is suddenly worth nothing? We are Human Beings stalking this planet and so far the only creatures possessed of rational thought, so we make up the rules, unfortunately some of us prefer to fear-monger our fellow humans for profit and gain, and some hapless souls fall for it. I know this must be terribly uncomfortable for some people but there are no Absolutes. There is only trust, mercy and love so start radiating those qualities, its your job!

  11. 13 Ladislao October 7, 2009 at 2:51 pm

    To James:

    To answer your question, my family and I are making the best preparations that we can. Hopefully we’ll be able to survive this fiscal storm that I believe is coming.

    I do have a few comments about what you said in your reply here.

    You first said this: “Its called “Hard Ball Real Estate” a game I know and love so well.”

    Now you say this: “There is only trust, mercy and love so start radiating those qualities, its your job!”

    What you say and what you stand for don’t seem to be aligning too well, huh?…

    Oh and I have another thought about what you said here: “What the hell are THEY going to do about our F-18 fighter jets if they try??” We don’t have to worry about other countries going after us. So many years we’ve been watching other countries, kidnapping people, overturning corrupt governments, etc. Those tables (I believe – and I hope that I’m wrong) will come from within, when millions of your “everyday” Americans lose everything. Other counties will then be watching US doing that to each other. I believe that (generally speaking) we have become complacent, arrogant and have lost the essential essence that once made us great; mostly humble, honest and united. I’m sad that my children have to witness what I think may be coming; again, I hope I’m wrong James.

    One more comment that you made: “Do you really think the whole world will agree that everything is suddenly worth nothing?” – No, not the whole world, but there will be quite a few (I believe many millions) that will finally understand that we’ve been scammed by the Federal Reserve and the Banks. If you think Madoff was a “Ponzi Scheme” wait till the Federal Reserve gets exposed for what they are and how other countries have imitated from this “fractional reserve banking system” of scams. It’s only a matter of time… But again, this is just my opinion… You have to do your own homework to find that out yourself… It’s just too bad that I had to learn it the hard way…

    • 14 james October 14, 2009 at 9:57 am

      “When you believe in things that you dont understand,
      Then you suffer,
      Superstition aint the way, yeh, yeh.

      Very superstitious, nothin more to say,
      Very superstitious, the devils on his way,
      Thirteen month old baby, broke the lookin glass,
      Seven years of bad luck, good things in your past

      When you believe in things that you dont understand,
      Then you suffer,
      Superstition aint the way, no, no, no”

      Little Stevie Wonder, for Motown Records, Hitsville USA, 1972

      • 15 Ladislao October 15, 2009 at 10:35 am

        To James:

        Nice Song lyrics. I feel the very same way about YOUR approach in YOUR “beliefs” in our Federal Reserve system, which (in my opinion) is flawed and corrupt. Still don’t believe me, then you should watch these two videos. Maybe then you’ll finally understand. Then again, maybe not… But in any case enjoy the videos:



        Now I may have been a bit off with the $1.21 Trillion that’s furthering ourselves deeper (debt-wise) every month. But just to know that we’re $118.6 Trillion minus $99.2 Trillion that equals – $19.4 Trillion from 16 months ago is quite alarming, especially since we only have $2.1 Trillion in US Revenue. This is what is really sad. What makes it even more sad is (from what I can see in your reply to my post) that you believe that I’M “Very Superstitious.”

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