Situation

● Facing an expiration of its 13+ year lease in Manhattan’s Rockefeller Center, Lowenstein Sandler LLP (Lowenstein), a New Jersey-based multi-disciplined law firm, engaged Philip Weiss as their exclusive broker to advise the firm to identify, analyze and evaluate alternative midtown office buildings for their growing business needs.

● Lowenstein had experienced exponential growth from 59,000 square feet to 101,000-square-feet over the term of its lease. Based on historic growth models, the firm’s future requirement would expand to 125,000 square feet.

 

Insights

● As the office legal workplace has evolved over the years, adaptive re-use of older premises were not good solutions because it did not address today’s design criteria that maximizes recruitment potential of new professionals and incorporation of the latest state-of-the-art technologies.

● The need for “universal” offices and abundant amenity support facilities necessitated a detailed-driven process that included multiple negotiations, financial analysis, technological evaluations and construction assessments that focused a flexible, properly-timed holistic solution.

 

Operational Solution

A 15-year base case alternative was developed, which was the expansion and renewal of the current premises that would require the staged reconstruction of the current space over a period of 18-24 months. Aware that Lowenstein would be comparing the current premises, to other property alternatives, the base case as well as other buildings options was structured as “new” transactions, with market TI allowances and other concessions and commencing after Lowenstein’s current lease expiration date thereby providing “true” free rent to Lowenstein. A team of professionals (in-house as well as outside consultants) were assembled to provide the needed financial consulting, architectural planning, market research and market forecasting of market-drivers and rents. We also provided comparative financial analyses of alternative occupancy scenarios, district and submarket analysis reports, and demographic studies of employee commutation times, project scheduling and project management consulting.

 

Enterprise Impact

Planning for unimaginable events is the hallmark of a flexible, well-crafted “timeless” solution. No one could have predicted a-once-in-a-100-year event taking place and the global pandemic of 2019-22 which was just such an event. As the final negotiations were unfolding in March 2020 New York City was shut-down. By taking advantage of the weakened Landlord’s position, we were able to significantly improve the terms of the transaction by increasing the concessions by approximately 15%. In addition, we were able to develop and implement a program of staged expansion spaces by staggering fully built/furnished subleases to offset the cost-of-carry of the growth spaces until needed by the firm. Overall the transaction provided great operating flexibility and saved the firm tens of millions of dollars over the term of the lease