Negotiating higher rent for build to suit retail pad due to construction costs and rates increasing?
Any help or insight would be greatly appreciated. Basically what the title says. Have an executed LOI and about to sign a lease for a retail pad with a major retail chain. But, since the time of LOI signing, construction costs and rates have gone up by a multiple of 1.5-2x. Any tips on negotiating higher rent with the retailer to cover these increased costs? I don’t want to screw the retailer, just want to make sure the project is at least breakeven. Has anyone successfully done this and what approaches have worked for you?

Also any insight on provisions to accommodate delivery of construction delays due to supply chain issues would be appreciated too.
[{"id": "itrwe78", "text": "send them your proforma from your initial underwrite, then send them the new one but with a slightly lower return with the new rent.", "replies": [{"id": "its2xfu", "text": "Thanks. That\u2019s exactly the approach we came up with so far, even going so far as to include four different revised construction estimates we got. Do you know if most major chains have been willing to work with these increases and if so to what degree? Like can we expect them to say go pound sand, or - we will give you 10 percent increase in rent (which would not put Us at breakeven), or - we will give you 25 percent increase in rent (which could put us at breakeven?)", "replies": [{"id": "its42r5", "text": "PM me", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "itrzblt", "text": "this is happening all the time right now, I would go to them and be candid, be as open with your numbers as possible.  If this is a major chain thats growing this is unlikely to be the only deal thats under cost and rate pressure.  I would view this as an opportunity to build a trust-based relationship with the retailer.", "replies": [{"id": "its2z8g", "text": "This is great advice and heartening to hear we are not the only ones in this situation. Thanks. Do you know if most major chains have been willing to work with these increases and if so to what degree? Like can we expect them to say go pound sand, or - we will give you 10 percent increase in rent (which would not put Us at breakeven), or - we will give you 25 percent increase in rent (which could put us at breakeven?)", "replies": [{"id": "its7x3l", "text": "it'll be very specific to the retailer and their culture, as well as how active they are in leasing right now.  if this is the first time they're hearing this they'll likely not be too pleased, but if this is a recurring theme in their pipeline they're going to be ready for the conversation.    \n\n\nthe guys on the other end of the table, assuming they're employed by the retailer, are likely  bonused on doing deals and won't want to just walk away.  there's a looming recession (or so I've heard), do you have a strong enough balance sheet to keep the rent low for the first 5-7 years then do a big increase in year 8 to make it up on the back end?  This allows them better cash flow in the near term while they pay down their debt, and once the rent increase comes they're equipped to handle it.\n\n\nalso, this might just be me, but I would not agree to do the project at proforma breakeven, make sure you include some (if small) profit for yourself if you're open booking it with the tenant.  when developers would tell me they're making no money I just assumed they were screwing me in some other regard and I trusted them less.", "replies": [], "depth": 3}], "depth": 2}, {"id": "itsggpm", "text": "Will second this.  Financing a BTS anchored retail with a large regional chain and the developer took this same approach.  Being open and honest makes the most sense - for this company, having to start from scratch again would guarantee their rent would be significantly higher and potentially at a lower quality location.", "replies": [], "depth": 2}], "depth": 1}, {"id": "its2ra8", "text": "Send an updated budget and be transparent. In most (if not all) of the BTS projects I've funded, rent is set at a % of construction costs (within reason). In the past month, I've seen two national tenants increase their rent % for developers as financing and constructions costs have increased.", "replies": [], "depth": 1}, {"id": "ituc78t", "text": "Dealing with similar issue on a deal. One solution our team is currently negotiating is we added 1 year of additional term on the back end of the lease, increased rent, threw more free rent into the deal, but essentially used that free rent to buy down the rate in the first 24 months so years 1-2 tenant has a \u201cteaser\u201d rate which ended up being about 22% less than starting. This worked for our underwriting and tenant was receptive.", "replies": [], "depth": 1}, {"id": "iv5glpf", "text": "I do a ton of BTS deals with a specific major chain retailer. Anytime we need more money or time, we go back asking for more than we need, with justification for the increase. We might even get some sort of preliminary bids from a GC to justify cost increases.\n\nAlways ask for more cause they\u2019ll beat you down a bit anyways. For example, if you need 10% increase, ask for 15%. \n\nWith timeline extensions, we will usually trade deals. Bring one up in exchange for pushing one back. If you don\u2019t have anything to move up, you just have to bite the bullet and say you need the time. But make sure the deal is all set to go forward before asking with DD and entitlements. They\u2019ll be much more apt to giving you an extension and rent increase if you\u2019ve got everything lined up.", "replies": [], "depth": 1}]