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Case Study – Restacking Buildings


A three building portfolio consisted of two large buildings on a campus totaling 475,000 sf with occupancy at 86% and a third, smaller building in reasonable proximity totaling 80,000 sf which was 42% leased. In the larger buildings there was a nationally recognized 100,000 sf tenant who was vacating at year end. Their departure was unanticipated in underwriting and therefore no money was allocated for re-leasing costs. In addition, there was another 53,000 sf nationally recognized tenant in bankruptcy who had indicated their intent to stay in the project. This tenant’s lease was near the top of the building and at below market rates. They had a very favorable renewal option, including an $18.00/sf rate which was approximately $3.50/sf below market. However, they only needed approximately half of their space when they emerged from bankruptcy and their renewal option did not allow for a reduction in the premises. If forced to renew at market rates, this tenant would vacate completely. There were several large lease prospects known to be in the market at the time.

The smaller building down the road had difficulty leasing and occupancy had only recently climbed above 35%. Typical tenant size was 1,500 to 3,000 sf, however the entire 26,000 sf second floor was vacant. Market rates for this building were approximately $17.00/sf.


Cindy created a strategy to move the bankrupt tenant to the smaller building at the end of their lease, for half the space, and at rates in line with their renewal option. Doing so accomplished several things:

1) Filled the smaller building to 87% occupancy,

2) Created a larger contiguous space closer to the top of the larger building allowing for one or two of the prospects that were out in the market,

3) Allowed the owner to lease the larger building at significantly higher rates than the renewal option of the existing tenant, thus increasing value,

4) Positioned the smaller building for a sale, and

5) Allowed the cash from the sale to be used to fund the leasing costs necessitated by backfilling the unanticipated vacancy in the larger building.

Despite the tenant’s corporate mandate to freeze any real estate decisions, Cindy felt strongly that she needed to make this deal happen.


Cindy’s team approached this tenant with the plan, however was initially turned down. After several months of building a business case as to why this was their best course of action they were able to convince the tenant to make the move. The tenant received brand new space that was the right size for them, in a building where they were the major tenant and could now gain signage, and at rates that were favorable and acceptable to their corporate office. Cindy’s owner was able to lease the entire floor at one time at rates at the top of the market, and position the building for sale. A short time later the building sold allowing the owner to utilize the capital to lease the remaining two buildings in the portfolio. In the larger building, a large block of space was created that allowed for maximum leasing flexibility and at rates higher than the renewal option would have allowed.

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