CHALLENGE

In 2018, a buyer acquired a Class A Office Building as a value-add play with 53% of the building's leases expiring within three years. Although the property was fully occupied, the rental rates being paid by tenantswere below market at the time of acquisition. Unfortunately, the onset of the pandemic led to four tenants vacating their premises as they shifted to working remotely.

ACTION

A proactive leasing and renewal program was initiated. Two tenants were renewed at increased market rental rates, and early termination agreements were negotiated with the tenants who vacated the premises, resulting in the buyer receiving termination fees paid by the tenants who vacated their offices. Furthermore, a targeted marketing program was launched to attract new tenants that aligned with the vacant spaces' offerings.

RESULTS

• The property maintained a 100% economic occupancy level throughout the buyer’s ownership.
• Renewal and new tenant lease rates increased by 17% compared to those in place at the time of acquisition.
• The buyer incurred no out-of-pocket costs for tenant improvements as the early termination fees covered the cost of tenant improvements called for by the new leases.
• Sold property in 2023 for 156% of original purchase price 5 years after acquisition.