The Challenge
• Lease expiration was coming due in what we expected would be the peak of the real estate cycle.
• Dorsey backfilled their suite from another law firm, which equated to excellent leasing terms but poor layout and very inefficient space.
• The space provided an excellent reception with incomparable views, so leaving or trying to replicate that experience another building would be a challenge.
• The lease expiration was not due to expire for four years at the time of our engagement.
Strategy
• Our expectations were the real estate market would continue to make an aggressive run, putting Dorsey in a very poor position to negotiate in a more traditional timeframe (18-24 months out from expiration).
• Columbia Center had recently traded ownership and Dorsey was the largest private (non-government) tenant in the building. We knew keeping them in place and extending their lease would be very valuable to Gaw Capital, the new owners.
• A strong relationship with the agents for the building gave us insight that ownership would be open to an early negotiation in which we could potentially downsize and rearrange the space in a more current and efficient manner.
• We brought on teams to interview for the architecture assignment, project management and began negotiations that would allow us to give back space and receive a substantial contribution from the landlord to complete our tenant improvement work.
Results
• 30% decrease in footprint immediately while keeping our current low basis rent in place until the true expiration (still 2.5 years out). Immediate savings in the seven figures.
• Negotiated the next lease 3 years early. Over the course of our negotiations, the market improved even more than we had anticipated (Amazon and F5 each taking down competing towers), making our decision to negotiate early a present value savings of close to $10 Million.
• Received capital from the landlord to pay for the majority of our needed improvements, creating a space that not only was more efficient but more current to cater to the next generation of attorneys and their space needs.
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