The Background
Getagadget is an Austin-based company that is a wholesaler of novelty resort and promotional items.
In 2010, we helped Getagadget negotiate a lease for 30,600 square feet with a seven-year term with incredible below-market rates. In 2014, two years ahead of their renewal, AQUILA began evaluating Getagadget’s potential real estate solutions which included purchase options, build-to-suits, ground-up construction, and lease options.
The Challenge
Getagadget needed 30,000 to 40,000 square feet of warehouse space in Southeast Austin but was faced with significant rental increases due to current market conditions.
Additionally, over the course of Getagadget’s term, its requirement had expanded to include a need for overnight trailer parking and outside storage – something the existing landlord wouldn’t allow.
The Solution
AQUILA took Getagadget’s requirement to market and presented a wealth of options to the client. Over a 24-month period, AQUILA presented the client with multiple purchase options ranging from existing buildings to ground-up construction, as well as lease options for both new construction and existing warehouse developments. We ran every trap and presented the client with several attractive deals.
The Results
Ultimately, the due diligence that we did in presenting so many different options gave AQUILA leverage when it came to negotiating a renewal with Getagadget’s existing landlord.
AQUILA negotiated a new seven-year lease at below-market rental rates and above-market concessions (free rent and an improvement allowance). Almost as important as the economics of the transaction, our team negotiated a right of first refusal on two adjacent spaces.
Lastly, AQUILA worked with the landlord to allow Getagadget to park two trailers overnight, allowing them additional overflow storage until their expansion/right on the space next door kicked in.
In the end, Getagadget’s willingness to pursue options early – 24 months ahead of its renewal date – resulted in AQUILA’s ability to secure another incredible deal that was a win-win for the tenant and the landlord.
And that’s not all…
Two months later, Getagadget’s existing neighbor decided to sublease its space with 18 months left on the term and approached our team to gauge interest in expansion. At the time, Getagadget had determined that growth was 24 months out and decided to pass.
Not long after our rejection, the existing neighbor found a potential sub-tenant to take the space, but with one problem: the new tenant needed more than the 18-month term in order to have time to select a site and construct a new building. When approaching the landlord for an additional six to 12 months, the landlord rejected the request, only allowing them to extend them for 36 months or longer.
AQUILA caught wind of the problem and the time frame of the new tenant worked perfectly for Getagadget’s expansion plans, so our team came up with a solution that could work for all parties. Getagadget’s existing neighbor terminated its lease and the new tenant did a direct deal with the landlord for 30 months. Getagadget then executed an amendment that would kick in after the new tenant’s lease which would be co-terminus with the renewal it had executed four months prior.
This creative resolution solved everyone’s problems: the new tenant’s short-term need, the landlord’s desire for long-term stability, and met Getagadget’s future growth needs, while allowing for fixed cost expansion which took advantage of the market rates of today.
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