Leverage

The concept is simple.  It’s the thing you use to make the deal better.  But in real estate negotiations, the extent of a tenant’s leverage and how best to exercise it, is less than obvious.

To be sure, in soft markets like that of current day San Francisco, tenants enjoy basic leverage just for showing up.  But basic leverage won’t yield extraordinary.  Extraordinary requires accessing the maximum leverage a market will afford, an impossible undertaking without specific knowledge and strategy. 

How do we access total leverage?  We start by assembling a curated list of sites, each of which could work for our client, all of which encompass the compliment of landlord motivations necessary to drive leverage.  The most essential motivators for leverage creation include vacancy, pending lease rollover, cost basis, debt, and hold period or investment thesis.  When the combination of these variables is too severe (e.g., a broken capital stack) a productive negotiation is impossible.  The sweet spot is the place in which there is sufficient distress to compel aggressive action by the landlord but the landlord remains capable of transacting.  Once our site list is assembled, we compel landlords to compete for our client’s occupancy through multiple rounds of negotiation.  With each successive round, we exercise leverage to enhance value. 

What’s the difference between basic market leverage and maximum leverage?  At least 25%, often more.  The best part, maximum leverage costs no more to attain.  It simply requires selection of the right advisors, those who truly understand how to navigate the market to access total leverage.