Tenant Representation: Consolidation and Lease Restructure

Our client is a leading insurance and financial services company headquartered on the east coast. The relationship with the client began when Blackacre Advisors was engaged to assist with the renewal of a subsidiary's lease in a Class C building on the north edge of Chicago's Loop. To generate leverage with the current landlord, we identified numerous alternatives in the market that could accommodate the subsidiary's requirements. Among those alternatives was a west Loop building that housed our client's regional office. A couple of years earlier when Loop market rents were at their peak, the client had signed a lease for the regional office to take the top floor in the new Class A building.

Now, however, with six years still remaining on the lease term, the client's west Loop lease was considerably above current market rents. Recognizing this, we advised our client that the landlord was attempting to refinance the building and, as a result, would aggressively pursue any deal with a national credit tenant. We also knew that the landlord had a large block of space in the low rise that had never been leased.

Combined, these factors presented our client with an opportunity. Looking to both reduce its occupancy costs for the regional office and to strike an aggressive deal for the subsidiary's requirement in a more efficient Class A building, the client elected to follow one of our recommendations: bring the subsidiary and regional office together and swap the premium top floor space for a more efficient floor in the low-rise of the west Loop building. In negotiations with the landlord for a 26,399 square foot lease during this window of opportunity, Blackacre Advisors achieved the following for the client:

• Lowered the per square foot net rental cost for the regional office by over one third, to below current market levels,
• Bargained for an extended period of rent abatement for that portion of the floor taken by the subsidiary,
• Negotiated for a generous construction allowance with the ability to apply any unused portion of the allowance against move costs or as a credit against rent,
• Delivered a thoroughly negotiated work-letter where construction was to be tenant-managed, and
• Negotiated, in the amendment, improved, more tenant-favorable language for certain key provisions of the existing lease.

Pleased with the results achieved in the downtown Chicago transaction, the client shortly thereafter asked Blackacre Advisors to assist with a 19,452 square foot lease in Chicago's western suburbs. After the completion of that project, we have begun to work with the client in other markets outside of Chicago.