Fahlgren Mortine, a 50-year-old downtown Cleveland-based professional services firm, needed to significantly reduce their occupancy costs to respond to the economic downturn in 2009. With one year left on their current lease, the firm needed to downsize their 35,000 square feet by 30% and still allow for future expansion, lower their rent, and avoid any outlay of cash reserves for tenant improvement refurbishment or new build-out costs. The firm also needed to maintain or improve upon the creative appeal of their office space. Allegro was engaged to lead Fahlgren Mortine through the decision making process to acquire the best possible space and also reduce their occupancy costs.
Allegro met with the firm’s key partners and developed a project strategy focused on achieving the key financial, operational, and facility needs. Allegro executed a comprehensive tenant representation process to evaluate market alternatives. After securing landlord proposals from a shortlist of viable options, Allegro identified the qualified finalist locations, which included the current facility.
Allegro conducted due diligence on the various landlords’ financial conditions and outlined the financial restraints and drivers that would impact the client’s lease deal terms. Allegro developed a business case that outlined the financial benefit to both landlord and tenant for restructuring the current lease. The business case, combined with the reality of having real market alternatives as acceptable back-up options, created the negotiation dynamics of an obvious win-win with the current landlord.
The current landlord ultimately offered an extremely aggressive deal that was clearly the best option for the firm. The space was reduced in size by over 30% and the rental rate was reduced to significantly below market rates. The remaining term on the original lease was eliminated, creating an immediate reduction in occupancy costs, and a new and more tenant-favorable lease was executed. Appropriate refurbishment allowances were secured, along with favorable rights to accommodate future expansion. In exchange, the landlord received five additional years of lease term and a stabilized building rent roll.
Allegro’s work was performed on an hourly basis and Fahlgren Mortine received a significant return on its investment in Allegro’s fees. This fee structure eliminated conflicts of interest that pervade renewal versus new lease transactions.