Lease Negotiation Points for National Tenants, LOI’s, What Happens When a Tenant Goes Dark (Part 2 of 2)

Today we’re interviewing James Chung, he is the Executive Managing Director and Managing Principal for the Western US for Cushman & Wakefield's Retail platform. He has been with the company for 15 years and has worked with over 30 national tenants and over 9 million sf of retail across the Bay Area in Silicon Valley. Some of his clients are: AT&T, Chase Bank, Adidas, In&Out Burger, and Sur La Table.

Read the full interview here: https://montecarlorei.com/lease-negotiation-points-for-national-tenants-lois-what-happens-when-a-tenant-goes-dark-part-2-of-2/

In terms of leasing retail space to a national tenant, what makes a national tenant want to lease a particular space?
Every tenant has a different purpose, and each tenant also has a different requirement for the optimal environment for which they can thrive on, and we are often involved in developing a strategy for them in our market. For example, some tenants only want to lease in grocery anchored shopping centers, and they only want to look at a Safeway or Whole Foods anchored center (or the like caliber). Or we could be working with a 100,000 sf box tenant who needs a certain amount of land, they need access to major freeways, and they need the demographic to be above a certain threshold within a 1 – 3 – 5 mile radius ring area. Or we could be working with food tenants who just want to be on downtown, street front environments where they want to be part of a community, there is a lot of foot traffic, and they don’t want to be in a shopping center. In order to help them position themselves in the market it depends so much on the tenant and their process. We also provide analytics on anywhere from psychographic, to demographics, to data on their competitors and sales volume, so there’s a lot of information that goes into the analysis of an opportunity and while one person’s success or failure won’t dictate the success or failure of the tenant at hand, it at least gives a certain starting point of who has done what in a particular market. The appetite for growth is so unique to each tenant that it depends on their requirements, some people are positioning for public events, some are repositioning the market, some people are closing stores, and only want to combine units, so each requirement is truly unique, which makes our job unique. James likes the work he does with a lot of household names that we see, and being able to walk in the stores, shop at them, and eat at them after completing the process. The deal cycles may take a few months to a few years and it’s fascinating when he sees the body of work in the form of storefronts, or a restaurant as a living organism since it creates jobs, it is feeding people, or simply seeing people buying clothes, it’s very rewarding to him and some of the reasons that it attracted him to retail.

Once we’re past the LOI Are they going to try to renegotiate the price when the lawyers get involved?
Typically no, it is assumed that the business items have been agreed upon, and at that point you’re only negotiating the legal language.

What are some deal-breakers for national tenants that we as investors should be aware of?
It depends on how bad they want the site. For example, for a lot of landlords, termination clauses are deal breakers, that means early kick out language and things like that, but ultimately everything is negotiable, so the deal breakers will be dictated by the opportunity and the players at the table, unfortunately there is no standard there.

Contact James Chung here: http://www.cushmanwakefield.com/en/people/james-chung

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