Not that long ago, having a good long-term lease with options was a good thing. Now, in these pandemic times, a long-term lease could be big liability! This is true for both landlords and tenants alike. When the pandemic first started, tenants were looking to their landlords for relief. However, many landlords are leveraged with their own financial obligations along with mortgages of their own, which may restrict lease modifications and rent reductions. .
This presents a tough situation for all, but landlords often try to avoid legal battles for nonpayment. The alternative has led to accountants all over the U.S scrambling to find solutions for lease concessions.
Before business owners in Massachusetts and all over the nation begin asking themselves “Should I sell my business in MA?”, they should consider the following options and long term strategies. The question could turn into “Why sell my business in MA now, when these concessions might benefit me in the big picture?”.
Types of MA Business Concessions
Many landlords have deferred rent payments and/or reduced rent and others have demanded rent payments in full effective the first of July. One increasingly popular plan is having the landlord agree to a rent payment based on a percentage of sales, with any shortfall being spread out over the remaining years of the lease. In May, Bedrock, a commercial real estate owner based in Detroit with over 100 retailers and restaurants downtown, decided to give tenants the chance to temporarily choose a percentage lease structure.
What This Means for Your MA Business Value
For those who are planning their exit and selling their business in the next year (up to 5 years) these lease adjustments will become a great asset for your company. Adjustments to your lease mean more funds available for reinvesting to meet new demands and/or health and safety standards. This is a fantastic opportunity to review your current lease for any major roadblocks should you want to sell. Common roadblocks that affect a lease are the tenants right to rent adjustment upon transfer, right to recapture and sometimes even fees for the transfer.
With Massachusetts, New Hampshire, Connecticut, Rhode Island and the rest of the New England struggling to keep evictions at bay and retail locations open, now is the time for landlords and tenants to work together for solutions that will help both parties. A good business broker can perform a business valuation to determine how your lease affects your value and provide guidance on next steps.
Systems such as ROI’s Value Maker can also provide important information on what drives your value, provide options, and even follow-ups to determine growth. Don’t hesitate to call us today to talk about your exit plan! Your question could be “Why wait to sell your business in MA?” by the end of the conversation.
Don Buehler, CBI ROI Corporation
His career started as a store manager with McDonald’s Corporation, where he worked his way up to the ownership of 6 franchises, which he operated for 15 years. Don sold these to pursue his own restaurant concept, Krazy Karry’s Backyard Grill, which he operated for 7 years.
Don brings a wealth of practical, operational and technical knowledge to any deal. He can empathize with business buyers and sellers, and analyze how to best help them achieve their goals.