The Situation

Zello, a high-growth producer of push-to-talk software, owned and occupied a 2,200-square-foot converted-house office building on West Sixth Street.

Zello’s converted house on West Sixth Street.

The company was bursting at the seams in its current offices but liked its location on the west side of downtown. 

AQUILA was engaged to represent them in the acquisition of a new office space, and the subsequent sale of their existing office building. 

The Search Process

The Zello team was open to both purchase and lease options but knew they wanted to remain in the same neighborhood between Lamar Boulevard and Mopac Expressway. Additionally, they hoped to find a space with an outdoor component, like a patio or balcony. 

They needed 7,000 to 8,000 square feet immediately but planned to eventually occupy up to 15,000 square feet over the next few years. 

The market was extremely tight for their size range in and around downtown, and purchase options, especially at their desired size, were minimal.

The New Office Space

After exploring the available options on the market, Zello identified a 15,000-square-foot suite at Hartland Plaza as the right option for the company. The building is located just down the street from the house they currently occupied and the suite featured a private patio overlooking the downtown skyline.

The Negotiations

However, Zello was not the only tenant interested in the space. In fact, there was another company vying for the suite that had better credit. AQUILA leveraged its relationship with the landlord to give Zello the edge and secure the space. 

Additionally, AQUILA negotiated a phased-in expansion, in which Zello only paid for half of the space for the first 12 months. This would allow time to secure a subtenant to mitigate the obligation on the second half of the space, as Zello only needed about half of the suite for the first few years of the lease as they expanded. 

Finally, the landlord also conceded building signage rights to the tenant, which is uncommon for a tenant of Zello’s size. 

A Temporary Solution

Because Zello occupied the house, they needed to secure new office space to move into before they could vacate the space and allow a buyer to move in. 

The space at Hartland Plaza required significant construction to be built out to Zello’s specifications which would take a number of months. 

As a part of the negotiations for the Hartland Plaza space, AQUILA secured a temporary space within Hartland Plaza for Zello to occupy during the construction project. Zello was able to occupy the space immediately and at no charge throughout the build-out process. 

This allowed Zello immediate room to expand and the ability to keep hiring, relieved the cost to move offices twice – first into the temporary space and subsequently into their long-term space, and allowed them to move forward with the sale of their office building. 

The Sublease

AQUILA identified and secured a short-term subtenant prior to the phased expansion. This meant that Zello will not have to pay rent on the full 15,000 square feet until the sublease expires and the company is ready to expand into the full space. 

The Sale of the Sixth Street House

Shortly after marketing for the property began, AQUILA secured a buyer for the existing office building and achieved the highest sales price per square foot in Central Austin to date. Competition for the building was high given its desirable location and the dearth of purchase options available in the market, which allowed AQUILA to leverage the buyers against each other in order to secure a high purchase price for the property. 

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