How to Renew a Lease Like a Wolf: 5 Simple Steps So Create the Find of Value that Makes You Howl at the Moon!
How to renew a lease like a wolf: 5 simple steps to create the kind of value that makes you howl at the moon!
By Ward Richmond
I woke up this morning and like always, I meditated. One piece of my mediation ritual is to repeat the following mantra: “Create more value than anyone expects.” I learned this simple incantation from none other than, Tony Robbins.
When people ask me about the benefits of meditation, how I meditate, etc., my aforementioned value mantra is typically my favorite example. How it works: I repeat “create more value than anyone expects” over and over in my head for about 10 minutes (along with some other cult-like things I picked up from Tony).
The repetition of this phrase causes me to begin each day with a focus on value creation. It is a widely known fact that if you create value consistently, you will reap massive benefits in life. End of story. Contribute and you shall receive. Maybe, one day, I’ll be able to teach a class on meditation, but today I’m going to focus on the art of the commercial lease renewal. This is an art form which I have mastered and one that you should take very seriously if your business spends a significant amount of money leasing commercial real estate.
This Sunday morning, as I chanted my value incantation, I thought back to a conversation I had on the previous Friday afternoon, with a real estate director about a 100,000 SF industrial lease renewal. This guy, works for a massive company with a huge distribution footprint. Shocking to me, there is this internal mentality that is like, “Oh, it’s just a renewal – we’re just gonna renew.” Actually, its not that shocking. A lot of companies out there view lease renewals and real estate in general as a necessary evil versus an opportunity for massive value creation. He went on to say “We always work with ol’ Bobby Broker (this is a fake name) in that market. He’s a retail broker but he handles all of our real estate.”
What the what? Retail?! The broker representing a publicly traded company on a 100,000 SF industrial lease renewal is a retail broker?! Being repped by a retail broker on an industrial lease renewal is a surefire method to NOT create more value than anyone expects. Don’t let this happen to you.
When it comes to lease renewals, the only way to create massive value is to treat every renewal like a new deal. Even if, for operational purposes, you are perfectly happy in your space and Prologis sends you a turkey every year for Christmas, don’t forget the fact that you are about to commit to a multi-million dollar, long term, relatively illiquid, transaction. This is big money. In the case of a 100K SF deal, assuming 5 years at $5 per square foot, you’re talking about a $2.5 Million spend. In the world I’m living in, this is a relatively small deal, but, hell, it’s still $2.5 MILLION DOLLARS, bro!
“When it comes to lease renewals, the way to create massive value is to treat every renewal like a new deal.”
I have a client looking to move their overall EBITA by $15 Mil next year. We are already getting close to moving the needle $3 Mil just being badass commercial real estate negotiators who operate like a motherflippin’ wolf pack.
By the way, when I say wolf pack, I’m not talking about the Wolf from Pulp Fiction. I’m talking about a strategic team of hungry execution specialists who understand that working together is the best way to get the job done.
5 SIMPLE STEPS TO CREATE THE KIND OF VALUE THAT MAKES YOU HOWL AT THE MOON!
- Call Ward “The Wolf” Richmond
- Work together with me to develop a strategic plan of attack. This is one of my favorite things to do. I mean, I meditate on how to create massive value every morning before I drink coffee. Come on, now!
- Assemble a team of bona fide experts to get the job done. The team will vary in size based on the project. (Sometimes, it’s just a hyper focused industrial submarket specialist. Sometimes, it’s an industrial/ retail hybrid if a client’s business benefits from a retail setting. Sometimes, we will bring in an industrial guy and an office guy so that we can analyze moving a heavy office component out of the warehouse and putting it into a separate office facility. FYI- sometimes this helps with recruiting.) Sometimes, I bring in my buddy, Gregg Healy, who is a supply chain wizard. Healy can analyze material handling, discuss automation and calculate transportation costs. We can then use that as negotiation leverage. If you have a major workforce and generating a ton of tax dollars for the municipality that you operate in, let’s bring in an economic incentives negotiator and a labor analytics expert to extract as much value as possible. This is how a wolf pack operates. I can keep going, but let me take a break.
- Sit back, relax and watch the Wolf Pack work. We will deliver:
- Badass Market Study
- Uncover multiple market options that meet your operational needs.
- Coordinate facility tours.
- Run RFPs and handle/ organize proposal process.
- Provide customized financial analysis.
- Utilize expert negotiation tactics leveraging extensive experience, market knowledge and unparalleled relationships with Landlords.
- Execute with absolute certainty. When it comes time to sign your lease renewal – or – maybe you decide that you can shave $2 Million off of your EBITA by moving to Atlanta, you are going to execute that lease document with absolute certainty. This is why you treat every renewal like a new deal. This is why you always work with experts. Whether it’s a $2 Million or $20 Million decision, you better be damn certain that you aren’t leaving that 10% on the table. Or even worse, 35%, like this case study right here.