Question

You own a building in Dammam that has been leased to a foreign company at an annual rent of 240,000 Saudi riyals. The building area is 1000 meters. The leasing company asked you to reduce the annual rent to 220, 200 thousand riyals annually. If you know that the price of maintenance of a square meter will cost 50 riyals, what will be your decision in each case of the above, taking into account that your study will cover the estimate of revenue for three years, with the rest of the factors constant. (How to fully occupy the building)

Answer 1

So essentially if we were to drop the rental down to 220,000 Riyals, while the other cost remain constant, we would have to design an approach so that we earn the differntial 20,000 Riyals that we have lost out as rental. There are multiple ways to do that

1) Get into a revenue sharing agreement with the leasing company for any additional sources of revenues like food & beverage sales

2) Set up a few food courts which will provide an additional revenue stream

3) Get into a cost sharing aggrement with the leasing company so as to reduce the maintenance cost on your end

4) Take a hard look at the current cost structure, and find out if there are any ways as to if they can be optimized further to cover up the losses