Asking for a percentage of the revenues
I recently purchased a commercial space that had significant vacancies because it wasn't run well. I filled up 35% of the vacancies in the beginning of the year before COVID 19 hit with going rates of about $2.50 per sq. ft nnn. Since March, understandably, I've had minimal traction in filling out the rest of the vacancies (about 25%). I received a couple of low offers for $1.5 per sq. ft. One of the offers I think the person is just trying to bottom fish to see if I'm desperate the other offer is a person that I don't think can afford to pay more. The good news for me is that the existing tenants are all doing well, and I'm fine financially w/o renting the empty space.
I'm considering negotiating lower rates with new tenants in exchange for receiving a % of the revenue. For example, saying that they can pay a $1.5 per sq. ft for the first few years in exchange for giving me X% of the revenue, with the ability to change it back to "market" rent every year and not paying a percentage of the revenue, but they need to make that decision at the beginning of each year. How unusual is that? What are your thoughts? Any other creative ideas.
Thank you in advance.
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