At the Hines-owned Aegon Center in Louisville, the law firm was able to see its existing 61,000-sf lease, which still had two years of 12 remaining, torn up in favor of a new long-term lease for 70,000 sf. The new lease rate is significantly lower than what they were paying, says Studley SVP Andrew Lechter, who represented the law firm in the transactions.
"We were able to demonstrate to Hines that the firm had other options, including kicking off a new office building, and that slack tenant demand was going to result in a long down time for their space if they left," says Lechter.
The new lease included a two-stage entry into the expansion space, says Lechter, including a decreased rent for the first stage expansion until the second stage expansion is completed. Lechter would not disclose the lease rate on the transaction, but says it was well below market rates, which are in the range of $25-$27 per sf per year on a full-service basis, including a tenant improvement allowance of $20- to $25 per sf.
In Lexington, the law firm had a little over one-year to go on a 10-year lease in Webb Companies' Lexington Financial Center. As in Louisville, the firm traded a 10-year extension of its 35,200-sf lease for a below-market rental rate, and also was able to negotiate a period of free rent and a "healthy" tenant-improvement allowance. Full-service market rates in Lexington are in the range of $17-$18 per sf.
"The firm really wanted to stay, so it was simply a matter of getting the right terms from the landlord," says Lechter, who completed a full evaluation of opportunities in the market so that the law firm could "negotiate from a position of strength."
In Atlanta, the firm wanted to move into the Downtown market from the suburbs, where it had time remaining on its lease. It ultimately chose Suntrust Plaza, where owner and anchor tenant Suntrust, a client of the firm, covered the firm's lease termination fee and un-amortized tenant improvement costs as part of a larger concession package in trade for the law firm's long-term, 23,000 sf lease. Lechter says the firm's per-sf rent stayed largely the same, but improved efficiencies in the Downtown building actually lowered the firm's costs on a per attorney basis. Full-service market rates for class A space in Atlanta are in the range of $27-29 per sf, says Lechter.
All three new leases included right to expand at predetermined times at predetermined rates, says Lechter. "The economics were important, but the firm also wanted to gain maximum flexibility, so we matched up expansion rights with the firm's projected growth rates in each market."
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
