CRE 101 - 10y Tenant Needs an Early Termination Clause
Like the title states....

Tenant saw another Tenant pass away from Covid. This Tenant is a CPA in his 60s and wants and early termination clause in his lease.

Or verbiage that allows him to exit due to his age after a certain amount of time. 

What are some suggestions?

I'm thinking no change in rates, a 5yr term, with a clause for early termination after 24months, but needs a 60d notice. He has approx 2700 sqft and very easy to deal with. Class C office building with 49k sf of contiguous space. I could bump him up a bit more by $400, but I'd have to add another 300sft space which I'm ok with. 

I did this with another renewal, bumped them up by $600 from their base of $2200, thats a 27% increase and added another 130sf office.

Suggestions?
[{"id": "irgys1t", "text": "This isn\u2019t that uncommon with mom and pop tenants at that age. \n\nEventually he\u2019ll call it quits he just doesn\u2019t know when yet. \n\nIs this a freestanding building or a strip center? \n\nEither way, I like your proposal.", "replies": [{"id": "irgz7ia", "text": "Edited above. 49k sf office bldg", "replies": [], "depth": 2}], "depth": 1}, {"id": "irhghjn", "text": "Give him a death termination clause only , not an early termination. It needs to be definite. We do them on medical tenant leases often", "replies": [{"id": "irhjk83", "text": "To expound on my comment, he also mentioned he wanted an early exit clause if his health deteriorated.", "replies": [], "depth": 2}], "depth": 1}, {"id": "irhhael", "text": "Would need to pay back all TI/LC in full + a % of amortized unpaid rent if exercised. Preferable to only have the option at a point in time instead of continuously after a certain date. \n\nNext buyers won\u2019t underwrite cash flows from TTs with termination options, so need to be appropriately protected + compensated here, especially with another term option on the rent roll or it\u2019s going to look like a minefield to the market.", "replies": [{"id": "irhjgyk", "text": "Very true. A sophisticated CRE veteran once told me to never pursue a tenant that jumps ship before lease expiration. Let them leave if they want. It's more problematic if they stay.", "replies": [{"id": "irhmpis", "text": "Yeah, but there\u2019s always a price for optionality. They\u2019re already under contract right? You have the leverage here.", "replies": [{"id": "irhug7o", "text": "I see how you're thinking.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "iri9e78", "text": "What are TTs? LCs?", "replies": [{"id": "iritpca", "text": "Tenant improvements and leasing commissions, they should be returned to you \nin a prorated fashion if tenant terminates", "replies": [], "depth": 3}, {"id": "irj2ajm", "text": "TTs = tenants", "replies": [], "depth": 3}], "depth": 2}, {"id": "iriunw6", "text": "This makes sense but I also need to be a bit flexible given the supply of office space and the options they have. I have a lot of small 130 to 300sf office which I lease out to non present tenants for 400 to 600 a month. The larger tenants that are sophisticated, def want more optionally.\n\nDo the small spaces cause the market to be worrisome?", "replies": [{"id": "irj38by", "text": "Hard to say without knowing the market. At the end of the day it\u2019s about cash flow and the risk associated with that cash flow \u2014 the smaller tenants likely have worse credit, so it\u2019s important to review their financials regularly. Important to keep the WALT up there because it sounds like a headache to lease up 300sf at a time. \n\n&amp; agree. You need to be flexible, but still savvy.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iri5gkd", "text": "You could potentially offer him a 1 time termination right with a termination fee + TIs/LCs?  That could maybe strike the balance between being fair to you and giving him what he wants?", "replies": [], "depth": 1}]