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Excerpt from webinar, Don’t Wait: Take Decisive Action to Reduce Occupancy Costs, on April 2, 2020

Landlord Negotiations

James Massey – Senior Manager, Consulting: 

“I’m going to say that the most aggressive programs I’ve seen, as I’ve helped a lot of folks over the last several years here with Tango, is about a five-year rotation on the leases. Which means that they’re only doing about 20% of the properties in any one year. And that’s not the challenge at hand. So what we’re going to have to do is we’re going to have to recruit some folks. We’re going to have to restructure how we do this. And I would give you the thought of let’s build teams commensurate with who’s across the table.

“Obviously, as we go through the list, if it’s a sale-leaseback, your finance guys probably built that. So it’s throwing it back on them to … They know the guys, the people across the phone there, let’s let them do it. The good thing is these folks typically are not really passionate about the shopping centers. And they’re typically single standing so it’s only money to them. The bad thing is they probably don’t care if you close, so that’s not a real strong threat. And there is probably cross to falls within the group.

“But certainly, I would lay off that group to them. For the rates, again use your directors.  Obviously, you probably lots of stores with this one landlord so you can sit down and negotiate them as a group. All right, that is great because If you have to give on some things, you can ask for it somewhere else and vice versa. Right? The other thing is they have other things to give. There might be better space that they want. They can give signage. The bad thing is these guys know their stuff. And so, they’re going to be well prepared for the negotiations. While there is a lot that you can accomplish in perhaps a small group, these guys are going to see you coming.

“The large landlords, there are folks in every city or regionally that have lots of properties. They’re very well-off individuals, families, or small groups of folks. And again, you can do several stores at once. All the things you can do with reach, you can do that. The challenge on this thing is they are likely to call your bluff.  If you threaten to leave, they are fine. They are in the business of finding new folks. This is not their first rodeo. So again, you can do that. But I would maybe do these with a real estate director or the real estate managers there. Because again, we got to tap … It is just not the lease term. The folks that are out doing street deals are the ones that know these people and have the relationships that can maybe get this done faster. Then the ones that you have left, the individual store onesies, twosies kinds of things, that would fall back perhaps on your traditional lease teams. (A) It’s within their authority and (B) Hopefully by this point, we’ve taken a lot off the table so that the folks who know how to do it and know how to wade through these waters hopefully very quickly, they can do so. They can pick up the pace and that is within their skill set.

“Before we talked about utilizing the pro forma here. One of the key things about this is as you go to empower these groups, you must have a strategy in place. Pre-approve deals because certainty gets a deal done. If they can walk in with the authority to sign something if the other person just says yes, I am going to tell you, that’s going to really help your deal-making. Authority gets deals done, so let’s empower your teams. Let’s prepare your teams, but let’s empower them to get these deals done.”

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