Represented by another brokerage firm, SchoolNet, Inc. was close to executing a long-term lease for raw space that did not include expansion or consolidation options. The broker had not appropriately portrayed SchoolNet’s all-in obligation, and at the 11th hour, the software company realized that the inflexibility of the lease could potentially comprise the firm’s long-term fiscal health and therefore withdrew from the negotiation.
Simultaneously, SchoolNet was referred to Studley (now Savills Studley) by a long-time Studley client. The company was looking for a clean start with a real estate firm that could secure a flexible lease for larger move-in condition space to minimize its capital expenditure. The timing was also important as SchoolNet’s current lease, which was expiring soon, had significant hold-over penalties.
Studley scoured several submarkets for space that was in 100-percent move-in condition -- either as short-term subleases or direct leases with termination options. In a timely manner, Studley identified a short-term sublease space, as well as space that had not yet hit the market. With input from several architects, Studley conducted in-depth financial analyses that detailed fully loaded lease costs of each scenario.
Studley negotiated a 22,231-square-foot direct lease for a full floor in move-in condition that included all of the furniture as well. The lease was structured to include free rent so that SchoolNet would not be burdened with a double-rent obligation. The five-year direct lease included three consecutive cancellation options after the second year, all at SchoolNet’s option, thus giving SchoolNet the necessary flexibility to manage its growth. In addition, to our client’s benefit, the payments Studley negotiated for the cancellation options were well below market standards.
525 Seventh Avenue,
New York, NY