Challenge
Medical Mutual, a Fortune 1000 health insurance company, was looking to consolidate five of their facilities into either one or two—one fully consolidated headquarters or a headquarters and an operations center. After discussion and analysis, it was decided that Medical Mutual wished to maintain a presence in downtown Cleveland, where their current headquarters was located, even if it was reduced.
Solution
Allegro began by considering all existing buildings and new development options in Northeast Ohio, including owned, leased, single, and multi-tenant facilities. Allegro developed a very complex, two-phase RFP process that went out to various owners, landlords, and developers around NEO, and led weekly meetings with Medical Mutual’s working team in order to define the strategy, evaluate proposals, and ultimately funnel out options for phase two of the RFP process.
After phase two of the RFP was distributed, several properties were shortlisted. Allegro completed a qualitative and quantitative analysis of each property and formulated construction estimates. Allegro then worked on economic incentives packages with counties, municipalities, and economic development authorities for each possible scenario to negotiate payroll tax credits, port authority financing for sales tax savings on construction costs, state and city subsidized road improvements, and real estate tax abatement.
One of the shortlisted properties included the historic Rose building in downtown Cleveland, the location of Medical Mutual’s existing headquarters. When they did not sign a lease extension, the building went into foreclosure. Medical Mutual first considered purchasing the building when they received a proposal regarding a lease extension from the receiver; however, there remained unanswered questions about the viability of the property.
Allegro analyzed comparable century-old office buildings in downtown Cleveland, evaluated market sales comps, and reviewed an appraisal of the Rose building. The company’s desire to stay in downtown Cleveland, combined with their rich history in the building and the opportunity to forego moving costs, led to their decision to purchase the foreclosed property to utilize as a headquarters, and another building in a Northeast Ohio suburb to serve as an operations center.
Allegro negotiated with the receiver on Medical Mutual’s behalf and on September 18, 2017, they purchased the 381,000-square foot Rose building for a purchase price of $37.9 million. Allegro structured the transaction to minimize the “purchase price,” breaking signage costs, lease buyouts, and moving cost savings out to allow for reduced real estate taxes in the future.
Ultimately, Allegro was able to lead Medical Mutual through a multifaceted headquarters selection process followed by complex negotiations and a successful transaction. This purchase has helped lay the groundwork for the client’s strategic, cultural, and financial successes for years to come.
