Novatech Group, a Canadian door manufacturer, required assistance to relocate its manufacturing operations from Warren, Ohio to Austintown, Ohio. The new location would allow a growing Novatech to combine warehousing from out of state into a single facility, alongside local manufacturing.
However, Novatech’s unique business requirements presented challenges along the way. The Allegro Real Estate Brokers & Advisors team navigated the challenges posed by a recent acquisition, international business complexities, and operational hurdles throughout the process of seeking a new location.
In the end, the Allegro team utilized a winning combination of creativity, business savvy, and real estate expertise to guide Novatech into a new industrial space with leasing terms that perfectly fit the company’s evolving needs.
A Changing Business Means Dynamic Real Estate Needs
Novatech Group acquired RSL, Inc. shortly before beginning work with Allegro. The owner of RSL also owned the existing Warren, Ohio facility, which Novatech had decided would no longer suit the needs of the business following the acquisition. However, because the owner of RSL planned to stay with Novatech, all stakeholders had a vested interest in finding a new location that would suit all parties.
The complexity of merging the two business units—RSL and Novatech—also required skillful communication from the Allegro leads. Because Novatech is headquartered in Montreal, there were times when the local operators of RSL had differing opinions from the remote corporate team. Allegro managed the differing viewpoints and helped to build consensus among all parties.
Balancing Immediate Space Requirements With Future Needs
In seeking a new space in Austintown, Novatech desired a flexible agreement with a footprint large enough to “phase into” over time. This would allow the merged business units to enact a longer-term plan for combining various operations into one facility.
Ideally, Novatech would immediately obtain 100,000 square feet of industrial space with the option to expand in intervals of 25,000 square feet over the first several years of the lease.
However, many landlords weren’t willing to consider this type of arrangement due to the potential lost revenue from holding the expansion space vacant.
After conducting initial market research, Allegro identified one of the few properties in the market that could accommodate both immediate and future requirements. Allegro deftly negotiated a phased square footage lease that worked for all parties. The first six months of the lease guaranteed 120,000 square feet; the second six months absorbed an additional 25,000 square feet; and finally, Novatech would occupy a full 175,000 square feet of leased space thereafter.
Allegro also obtained a fixed rent for the first two years to minimize lease costs while Novatech installed new machinery and equipment.
Amenities Upgrades Mean Added Complications
Amidst the unique lease terms, the landlord also needed to upgrade the building’s power supply to meet the requirements of Novatech and existing tenants. There were significant electrical upgrades needed to accommodate the relocation of various manufacturing lines. Additionally, both the insurance company and Novatech’s lenders required the sprinkler systems to be upgraded.
A new power substation was installed during negotiations, but would not be fully operational at the beginning of the lease. This created one of the main challenges of the entire process: timing Novatech’s move-in with the building systems improvements.
While the landlord was able to complete the new substation on site, it was discovered late in the negotiation process that the power company would be delayed in energizing the substation. Therefore, Allegro advised all parties in determining that there was enough power within the building’s existing infrastructure to accommodate basic lighting and other power requirements during the first six months of the lease.
International Negotiations Require Expert Communication
Allegro faced one additional challenge throughout the negotiations: Because Novatech is a Canadian company, there were many nuances in the standard leasing and negotiation process.
This acquisition and real estate transaction was Novatech’s first foray into the world of U.S. real estate, so they were unfamiliar with local customs and processes. Guiding the tenants through the standards of financing while also managing inter-company communications required detailed coordination—especially when gaining stakeholder input on letters of intent and the final lease agreement.
Allegro coordinated with referring brokers in Montreal and Chicago, managed direct communications with the client (including stakeholders both locally and internationally), acted as the main contact for all negotiations, and directed all communications with the landlord. The Allegro team also conducted on-site tours, drafted letters of intent, and facilitated a final lease agreement that met the requirements of the client. Meanwhile, Allegro also addressed the customs of local market leases, and reviewed the final lease documents with all parties to assure compliance with the complex business negotiations.
In the end, Allegro skillfully managed the protocols and expectations of differing cultures for a successful outcome.
Challenges Give Way to a Successful Result
Allegro led each side to the point where they were comfortable taking a leap of faith. The Novatech team trusted that the power required for their operations would be there when they truly needed it, even if the substation wasn’t powered up at the time of lease commencement.
Meanwhile, Allegro instilled faith in the landlord that the Canadian company, with a very different company structure than the landlord was used to seeing from American companies, would be able to provide it with the security it expected from any large tenant.
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