REA receives 2011 CCIM Marketing Deal of the Year

REA received the 2011 CCIM Marketing Deal of the Year for transactions completed over $1,000,000 for One Innovation. In September 2011 REA’s client successfully closed on the tenanting and sale of a 25,000 square foot building located at 10700 Research Road NE for $2,000,0000. As with all transactions in today’s market there was nothing traditional or simple about this transaction. The transaction included challenges such as trying to lease a building that was being foreclosed on, trying to sell a 100% vacant building, rejection of a potential lease by the owner and changes in parameters by the lessee. Click here to read more about this transaction.

One Innovation experienced many challenges; related to the sale and the leasing of the project. One Innovation was foreclosed on by GE in January of 2011, at the time of the foreclosure the building was 100% vacant. The goal was to sell the project by the end of 2011 as we as find a tenant; all while limiting the amount of any capital investment into the property. As if this wasn’t challenge enough once a tenant was identified several roadblocks occurred during the leasing process. The case study below outlines each specific challenge with the solution that was employed in each instance.

Overall REA developed a marketing plan that targeted: (1) end users, (2) developers that represented tenants and (3) tenants greater than 15,000 square feet that’s use allowed the building to be utilized in a substantially “as is” condition and that could create immediate cash flow to attract developers and/or investors to the property. These efforts resulted in Sandia National Laboratories (Sandia) making an offer to lease the building April of 2011 in “substantially as is” condition for occupancy by August 15, 2011.

First Challenge

The owner informed Sandia the lease term must be greater than five years in order to make the asset desirable in the capital markets. For lease terms five years or greater Sandia’s purchasing policy requires that a request for proposal (RFP) be developed and placed in the market to bid. Sandia put the RFP out to the marketplace in May with a response deadline at the end of June.

First Solution

The owner and REA made the decision at this time to continue the marketing efforts on the property. As a result two other tenants and a developer (Rio Properties) representing a bio-tech firm were interested in the property. Sandia awarded the lease the first week of July to One Innovation.

Upon the award, REA revised the sales package for the property to include the Sandia lease information to better position the property as an investment property. In addition to updating the sales package REA developed a website specifically for the property, informed potential investors of the changes to the project and updated the property sales profile from owner/user opportunity to investment opportunity. When Rio Properties (Rio) learned of the owner’s intent to lease the property to Sandia Rio expressed an interest in purchasing the property with Sandia as a tenant.

Second Challenge

On July 15th Sandia informed REA they could no longer accept the premises “substantially as-is" and in order to sign the lease they would require tenant improvements equal to approximately 30% of the building’s current value.

Second Solution

REA worked on the negotiations between Sandia and the owner to restructure the lease. Simultaneously a construction team was put in place to begin construction upon formal approval by the Owner.

Third Challenge

During the fourth week of July the lease was submitted for final owner approval and signature, unexpectedly it was rejected during the underwriting of the lease due to the ratio of additional capital required to the current value of the building. Based upon the decision of the underwriters, the owner decided the best course of action was to repackage the property as a development opportunity with a ready willing and able tenant and a turn-key construction team in place. Based upon this strategy, REA assembled a new package and revised the website.

Third Solution

Within a week of completing the new package for the property there were three offers from developer investors. The decision was made to proceed with Rio Properties (Rio) for several reasons: (1) Rio accepted the terms of the lease and the construction team that had been assembled (2) Rio’s knowledge of the property because of the due diligence they had conducted for their potential bio-tech client and (3) the owner believed that because Rio’s owners are CCIMs they had the ability, knowledge and wherewithal to execute the purchase and deliver the building for occupancy in 30 days. This decision was made on August 15, 2011.

On September 7, 2011 a simultaneous purchase contingency in the lease between Rio Properties and Sandia was removed and the sale closed. This was a win- win- win transaction. Our client achieved their objective of selling the asset before the end of the year at a value added price. Sandia was able to move into the space they wanted with the terms they requested. Rio Properties purchased as asset at less than 50% of replacement cost as a 12.5% CAP of the scheduled base rent.