Case Study | The Renewal Decision

Network Expertise Informs the Decision
A Fortune 500 Company faced a leasing decision with serious economic implications, with a lease expiration date coming up on a 50,000 SF building and a ten acre site, the Company needed to make accurate comparisons among all potential spaces including the one they currently occupied. Their broker called in Horgan & Associates to assess the condition of major capital equipment that would be the Company’s responsibility under a triple net lease.

Understanding the Objectives
Horgan & Associates first reviewed the Company’s existing lease and met with the broker and Company representatives to understand their goals in the lease assessment process. Next we toured the property with the Company’s facilities people for a first hand understanding of the structure, improvements, and major systems.

The Company’s RFI
Next, we assembled a team of experts from a variety of disciplines to assess the need for and provide budgets to address improvements identified in a thorough inspection process. We supervised the onsite inspections, reviewed draft reports, and value engineered resulting budgets. At the behest of the broker, we presented our conclusions on scope of work and cost to the Company. Our report was incorporated into the formal Request For Information from the Company to its landlord.

Assessing the Landlord’s Response
The landlord’s response included a scope and a budget for major capital issues based on its own review of major systems by its representatives. When the landlord determined that it would undertake the improvements under the terms of the existing lease, Horgan & Associates supported the Company’s broker by analyzing the landlord’s response.  We reviewed the response in the light of existing lease language on Tenant’s responsibilities for maintenance of the property and on market conditions for improvements. We incorporated interest rate information and amortization schedules based on the useful life of various improvements. These included roofing, paving, glazing, HVAC, boilers, restrooms, and certain indoor air quality issues.

An Informed Decision
Horgan & Associates’ input enabled the broker and this Fortune 500 Company to make informed judgments concerning the value of its present space and its future relationship with its landlord, based on quantifiable, market comparable information. #

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