Academy for Educational Development Inc.
The Academy for Educational Development (AED) is a longstanding Savills Studley client in Washington DC. Over the course of a 15-year relationship, Savills Studley has advised AED on numerous commercial real estate transactions totaling over 300,000 square feet.
Based on AED’s prior relationship with the firm, AED again turned to Savills Studley in consult on its New York City office lease. AED engaged Savills Studley more than two years in advance of their existing lease expiration and with the citywide real estate market experiencing softness, Savills Studley recognized that there was a narrow window of opportunity to upgrade AED’s space. In addition, AED had long-term contracts with its New York City clients allowing the company to sign a long- term lease, and gain additional leverage.
Savills Studley did a thorough analysis of the overall occupancy situation in New York City for AED and determined that there may be a possibility to upgrade to a better building with a built-to-suite, state of the art installation and still decrease the occupancy cost on a long-term basis. Following a complete market survey, including analyzing a stay put renewal option as well as all available properties in the submarket; Savills Studley presented numerous options for AED, including a forward commitment if AED were to move at the end of its lease term.
Additional analysis indicated that due to the sale of AED’s current building, which had been previously sold at the peak of the market, the building’s current landlord was now teetering on foreclosure. Furthermore, the building was being managed by an out of town special servicer, making it more difficult to negotiate a renewal.
Savills Studley’s first strategy was to try to negotiate a favorable renewal, however, as negotiations began the special servicer began marketing the property for sale. Since the seller was trying to reposition the asset to appeal to a higher-end clientele, it became increasingly difficult to renegotiate at a more favorable rate. It soon became evident that a move in the same submarket would produce more desirable terms.
With two years left on the lease, the new landlord would have to either offer significant free rent or deliver space two years after AED’s existing lease expiration. Due to the soft market, Savills Studley was able to find three opportunities with landlords offering forward commitments. After several rounds of negotiating and leveraging each deal against the others, the final transaction enabled AED to take two full floors in a building just a block away with a brand new installation. Ultimately Savills Studley negotiated a 15-year fixed rate lease with the tenant’s right to cancel after 10 years at no penalty. In addition, the landlord built the space for AED with no out-of-pocket cost. This new lease was agreed to over two years before the move in date and AED did not pay any double rent.
Soon after the lease was signed and the plans were approved, AED was sold to another company and no longer required both floors. Savills Studley was quickly retained to sublease a full floor. Within 90 days Savills Studley found a subtenant, and the resulting sublease was signed before the landlord began construction. The subtenant was able to design their own space to its liking and move in during the same timeframe as AED. The sublease, due to Savills Studley’s expert negotiations, resulted in additional profit to AED.
71 Fifth Avenue,
New York, NY
Lease Relocation, Sublease
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