Offer to extend my restaurant from a rich landlord. What to do?
Hello,  We are a family restaurant that has been operated for 2 years in the same location. Our neighbor next door just moved out and our landlord just approached us and asked if we wanted to extend to that particular location.  That would increase our restaurant size from 50 sqm to 150 sqm.

The threshold rent is 55 000 USD as minimum renting fee, and once the 6 % commision on gross sales exceed the breakpoint  (55 000 ) the 6 %  commision will be paid. So for example if my restaurant has 1 000 000  USD in gross sales, the annual rent would be  60 000 USD.

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In return the landlord will give 150 000 USD as tenant allowance for? If we tell the landlord to lower the TA, would this result into a  lower minimum renting fee? Now we want to have all heavy duty food production in our current premise, so there would be no need of investment in kitchen hat extractor, fat grease separator and ventilation in that particular location, thus we believe 150 000 in TA is too much.

1. Do you think that is a good way  to ask the landlord for lowering minimum renting fee? The perfect for us would be 45 000 USD as minimum renting fee, it would be less risk for us during this pandemic.
2. Is there any pitfalls we shall be aware of when taking over the neighbour location? Currently it is a clothing shop.
3. How to lower the deposit amount that the landlord requires? The landlord is requiring 6 months deposit, but that is too much for us. We can only accept 3 months deposit.

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Would appreciate any advices on this case.
[{"id": "gjm6dp6", "text": "It is 100% possible to negotiate with your landlord especially right now. \n\nThere are many vacancies everywhere. More Small businesses are closing than opening and that looks like the trend for the the next 2 years. \n\nThis is your perfect opportunity to ask for everything and anything you want. Don\u2019t be shy to negotiate.", "replies": [], "depth": 1}, {"id": "gjm6n12", "text": "Looks perfectly reasonable. Everything is negotiable. I would double check if that is the current market rate.", "replies": [], "depth": 1}, {"id": "gjm9ola", "text": "He is nervous, take advantage of this.", "replies": [{"id": "gjmcva1", "text": "Its hard to get retail tenants that can pay. Night be good to look at locking in a longer lease at current rates", "replies": [], "depth": 2}], "depth": 1}, {"id": "gjmm8b0", "text": "I think you are in a position of power. Filling that vacancy in the current environment is not easy.", "replies": [], "depth": 1}, {"id": "gjmp0u9", "text": "If the landlord is coming out of the gate with a higher TI allowance then what you need you're definitely in a good position. Maybe you can keep the high TI allowance and use any unused funds toward future rent payments...and you can request the lower rent on top of it. Regardless of what happens, you're definitely in a position of strength. Separately, the good thing about breakpoint sales is that if you're hitting those sales you should be in a good position too...maybe you can increase the breakpoint number too.", "replies": [], "depth": 1}, {"id": "gjn67sp", "text": "It sounds to me like you can do the production in the current space, negating any need for heavy expenses for improvements.\n\nFurther, the landlord, rightly, is asking for participation in your sales via the fact that he believes the location uniquely will impact your sales (assuming you do a good job running your business) on the plus side, in fact, he's betting on that, hence the rent at 55K + % rent.  Knowing this, I'd imagine he feels the rent is actually worth around 65K (as opposed to what you believe is ideal; 45K).\n\nI don't see anything in your post indicating where this location is but, typically percentage rents don't get discussed in BFE so, I'll presume this is in an area where there's some money.\n\nAt this juncture, *everything* is negotiable and the landlord is sitting on an asset that in most views, will be difficult to re-lease quickly. There's financial value in getting you to sign on the dotted line sooner as opposed to later.\n\nThat **shouldn't** be read as \"*impossible to re-lease*\".\n\nI don't see this scenario as a negotiation to see who blinks first, rather, one that you let your calculator do all the talking. It's just math.  Your landlord speaks math.\n\nDo the math and show him the numbers that work for you. Be fair and conservative....this market and the way our politicians are running the world is at best chaotic, at worst, dangerous and in fact; impossible to deduce what will happen next.\n\nAny guess you make will most *certainly* be wrong. Cover your butt. These are the times that make, or break fortunes. These are the times that people will read about 100 years from now and go \"*aha....I see what he did there*....***of course!!!!*** *......so obvious\".*\n\nBut it will only be obvious to historians.  Those of us that are *living* it right now are all trying to see what sticks to the wall when we throw it....just like everyone else.  Some of us will be right, and some of us will be incredibly, horribly, *stunningly* wrong.\n\nIf you want a lower rent, giving back some of the improvements money will help in that regard, but perhaps you can even end up at something closer to 35K in rent with an offer of a *higher* % rent.\n\nDo the math, make the offer and see what he does.\n\nThere's an old saying:  \"*don't ask, don't get\"*.\n\nHe came to you.\n\nYou're in the catbird seat.  Everyone needs to make money. Tenants paying too much rent do no landlords any good when they fail and he has to repaint and re-lease.  Ditto as to landlords making no profits.\n\nWhen your sewer lines are plugged, you want a landlord that appreciates the deal he made as well as you.\n\nWhen either party is gasping for air, both suffocate.\n\nThrow the guy a bone on the upside and see what he'll do for you on the downside.\n\nOne of the great things about real estate is; everyone ***can*** win.", "replies": [{"id": "gjnpl8k", "text": "It is the neigbhour next door, so we will break the wall and connect both assets together.  Thanks for your advice, will do my best to win :D", "replies": [{"id": "gjnxm7b", "text": "Win for both.\n\nNo good deal has a losing side.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gjn7a6i", "text": "Im not in your industry but just from personal experience Ive seen a lot of successful restaurants take over more space and then not be able to fill it. Its hard to fill that many seats every night. And a partially empty restaurant is never as fun as a busy one.\n\nWhat if you opened a new concept next door instead? Or just pass on it. Dont take over the space just to help him out. Gotta ask if you would have wanted more space if he hadnt brought it up", "replies": [], "depth": 1}, {"id": "gjneghm", "text": "What market are you in? TI of $100/sf is fat for retail, esp at a rent of ~$35/ft. How long is the term? Are you extending the term of your existing lease so that both leases are coterminous?\n\nCan you utilize 3x more space? What if sales aren\u2019t significantly more? You\u2019re taking on more risk...\n\nWhat\u2019s the rent + CAM on your current space? What are your sales? Restaurant health ratio is typically in the 10% range. Also consider the new administration will be pushing $15/hr min wage... your labor costs are likely to increase significantly in the next few years. \n\nHave you considered the additional CAM you\u2019ll be paying on top of BMR? Can you afford that?", "replies": [{"id": "gjnls40", "text": "Hey Neuro, We are a fast casual japanese restaurant. Yes coterminious.  \n\n\nThe cam is 60 USD per squaremeter. \n\nCurrent rent is 30k USD \n\n&amp;#x200B;\n\nRight now our sales is way above what we budget for a 50 sqm restaurant, 1 million USD in such a small space makes our operation challenging. We would be happy to have less revenue per sqm with and  smoother operations.", "replies": [{"id": "gjod7vf", "text": "Your current occ cost ratio is ~3.3%, which is great. Even with the expansion space and no increase in sales, at the quoted rent you\u2019d be ~9.5% occupancy cost, which should be fine, depending on your margins. You\u2019ll likely have a little higher variable costs with more staff and food/paper costs to handle the additional sales.\n\nKeep in mind you\u2019ll need to fit out the space - can you use the TI for FF&amp;E? If you don\u2019t need the TIs, then your proposal for less TI in exchange for lower rent is good. If the LL won\u2019t go for that, think about negotiating to use any unspent TI for rent abatement. You could also negotiate a lower base rent in exchange for an artificial break point (lower than the natural breakpoint) to give yourself more room on fixed costs but share more of the upside with the LL.\n\nAlso think about other non-economic terms you could squeeze out of them - maybe as a larger tenant you could justify getting additional signage thrown in? I would also take the opportunity to explore a co-tenancy clause on some of the important anchors that are driving traffic, if any. You\u2019re taking on 3x more risk, and depending on how much of the project your leased % is, you will have more leverage. \n\nWorst case you stay where you are and continue to likely be very profitable. No one goes broke making a profit.", "replies": [{"id": "gjpcqms", "text": "Wow thanks alot!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gjnpj8o", "text": "It sounds like you are trying to do a NNN lease with percentage rent and a minimum (\"floor\").  Clearly the landlord likes you and your concept because $100/ft is a very generous improvement allowance in most places.  \n\nYou can negotiate that if you don't need all of that allowance money it's fair to ask for a lower percentage rent and base for a lower allowance. \nYou can also make an offer along the lines of 6% of the first x.xM in revenue and 3% above that.  Or just put a cap on it all together. 6% on the first 2million for example is 120,000 with nothing in excess of that.\n\nYour store sounds very small at about 500 SF so I imagine this gives you a ton of extra seating area if you think your customers need it that could help.\n\nCongrats on your success", "replies": [], "depth": 1}]