Case Studies

 

 

 

 

  CHALLENGE
     
  Advent Software, a publicly traded financial software company, occupied 155,000 RSF in three different buildings in San Francisco's South of Market area.
     
  The multiple locations resulted in difficult work flow and communication issues.
     
  There were limited future growth opportunities for the company within the three buildings.

 

 

 

  APPROACH
     
  Work with management to establish criteria for best solution and measure alternatives against criteria.
     
  Analyze three options: lease vs. purchase, consolidation at an alternate location,  restructure and extend the existing leases.
     
 

 

  SOLUTIONS
     
  We located a single building South of Market that would allow for consolidation of the entire staff and accommodate growth up to 200,000 RSF in the same building.
     
  We subleased 2 of the 3 buildings occupied by the client.
     
  We exercised the right to terminate the lease in the third building.

 

 

 

  RESULTS
     
  Advent entered a 10 year lease, with an initial commitment of 110,000 RSF.
     
  Rent at the new location was 25% below the rent at the existing buildings.
     
  Secured expansion rights on the entirety of the 200,000 RSF building, as well as options to extend, contract, terminate, and purchase.
     
  The new facility provided a consistent look throughout, a better work environment, and state-of- the-art conferencing and server facilities.
     
  Since occupancy, Advent has expanded multiple times to a current total of 160,000 sq.ft.

 

 

 

 

 

 

 

 

 

 

  CHALLENGE
     
  CalFirst Bancorp, a major tenant, occupied 48,000 RSF in a Class A office building in Irvine in November of 2007.
     
  They had a custom build-out with interconnecting stairs and rooftop signage.
     
  Their lease term had eighteen (18)  months remaining.
     
  The landlord was pressing CalFirst Bancorp to renegotiate its lease immediately.
     
  The Irvine office market had significant vacancies (4,000,000 RSF vacant) with further deterioration in progress.

 

 

 

  APPROACH
     
  Allow the market to continue its downward spiral.
     
  Allow more of CalFirst's remaining lease term to expire, creating more potential relocation opportunities for the bank.
     
  Create competition for the exisiting landlord by reviewing and negotiating with other landlords anxious to secure CalFirst Bancorp as a tenant.
 

 

  SOLUTIONS
     
  Negotiated to an agreed upon letter of intent with the current landlord before searching the market for alternatives.
     
  After 7 months of negotiations, the landlord reneged on the letter of intent.
     
  We then investigated 32 potential relocation options and negotiated full terms at another Class A office building. 
     
  The prospective landlord provided complete improvements and new furniture at no cost to the client.
     
  We then approached the existing landlord stating the client planned to sign a lease on the proposed relocation site within 24 hours.  
     
  We proposed terms and conditions to the existing landlord which would enable them to retain CalFirst Bancorp.

 

 

 

  RESULTS
     
  The existing landlord made significant consessions almost immediately. CalFirst Bancorp subsequently executed a lease at its current building on terms which generated $600,000 in savings over the terms previously agreed upon, on which the landlord had renegged.  
     
  The new lease is the low watermark for any lease in a Class A office building in the Orange County Airport Area over the last five (5) years. 
     
  Landlord granted tenant the first seven (7) months of rent free.  Half-rent for months eight (8) through forty-six (46) of the lease term.
     
  The building was named for CALFIRST BANCORP with the appropriate signage rights.

 

 

 

 

 

 

 

 

 

  CHALLENGE
     
  Saatchi and Saatchi, a global advertising agency, occupied 106,000 RSF which included the entire 2nd through 5th floors plus several portions of 1st floor.
     
  Lease expiration had three-year time frame.
     
  $54 RSF ($32 over current market rent). Landlord offered to re-negotiate the lease spread over market premium over a new lease term with interest factor, which would be in excess of old lease.
     
  Building sold two years before end of lease term.

 

 

 

  APPROACH
     
  Wait until landlord was willing to forego the premium and renegotiate new fair market lease terms.
     
  Investigate relocation options while negotiating with new landlord, maintaining the competitive process.
     
 

 

  SOLUTIONS
     
  We continued to sustain leverage with other prospects.  The new owners, knowing we were in a competitive process, were finally willing to negotiate a new lease.
     
  They agreed to “walk away” from the remaining over-market portion of the old lease. 
     
  They agreed to a greatly reduced rent, including all the flexibility features suitable for new leases. 

 

 

 

  RESULTS
     
  106,100 RSF
     
  Terms were retroactive with initial rent of $24.60 RSF, resulting in a savings of $30 per RSF per year through end of lease term.
     
  Signed fifteen year (15) lease term.
     
  Option to Terminate within multiple months. 
     
  10 Year Option to Extend.
     
  Swing space. 
     
  $500,000 in lobby work redesign.
     
 

Work Allowance $45.00 RSF.

     
  Several months free rent.
     
  Signage rights.
     
  New low occupancy cost on a flexible basis for the long term.
     
  Building to be named Saatchi and Saatchi with appropriate signage rights.
     
    TOTAL SAVINGS:
  Three million dollar ($3,000,000) savings.

 

 

 

 

 

 

 

 

  CHALLENGE
     
  Psomas, a leading consulting engineering firm, occupied 32,000 RSF (40%) of Class B office building.  
     
  Tenant specific bulidout.
     
  Lease expiration 2009.
     
  Free parking.  
     
  Occupied building for 23 years.
     
  Lease rate substantially below present market.
     
  Property sold in 2007.

 

 

 

  APPROACH
     
  New owners of buildng began pressing for new lease in the ensuing months promising a market deal.
     
  Present market was overbuilt (4.5 million available square feet), negative absorption, transaction volume at a low and market continuing to weaken.
     
  Recommended Psomas delay negotiations until a later date and leverage the downturn  to their advantage. 
     
  Proceeded to investigate relocation options and maintained a time frame which would enable us to negotiate and relocate, if necessary.
     
  Initiated a comprehensive site selection process which garnered potential                 possibilities.
     
 

 

  SOLUTIONS
     
  The landlord waited to respond to our counterproposals hoping to limit our ability to relocate..
     
  At this point, the market was rapidly eroding. Their final proposal was at a premium to market.
     
  My orders were to strike a deal at the same lease rate as their existing lease, including all tenant work.

 

 

 

  RESULTS
     
  Property was located in which a major institution owner would be able to backfill 49% of space that had become vacant three (3) months earlier, taking advantage of lease-up budget.
     
  Tenant upgraded their Class B, 32,000 RSF office space (occupying two floors) to a Class A, 32,000 RSF office space..
     
  Transaction was neutral.  Landlord’s net rent received only paid their operating costs after allocation for and landlord’s out-of-pocket expenses.
     
  New lease transaction was the same economic terms as prior lease. New low watermark for a Class A office transaction in Orange County area.
     
  No out-of-pocket capital expense.
     
  Top of building signage (fronting on freeway).
     
  All parking free for lease term.
     
  Long term lease.