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Project Outline
Zango, Inc. is a leading online media company that provides consumers
access to a large catalog of free, popular online videos, games, music,
tools and utilities. The company has a young, tech-savvy workforce with
a vigorous “work-hard, play-hard ethos.”
We represented Zango in securing a new five-year lease on 71,000
rentable square feet of space over three floors in a on the I-90
Corridor. Our negotiations with this forward-thinking landlord enabled
Zango to construct at the landlord’s cost, an outdoor regulation-size
volleyball area, complete with sand and structured seating. Indoors
employees enjoyed the use of company-sponsored Segways to travel the
long hallways. The space was an ideal fit for Zango’s culture and a
powerful brand asset for new business development and talent recruitment
in the local marketplace’s highly competitive employment pool.
Due to strong business efficiencies, midway through the lease Zango
asked us to assist in a reduction of their facilities. This was
accomplished through a negotiation with the landlord of recapturing the
third floor. These negotiations resulted in a less than ten percent
(10%) buyout cost to Zango of their remaining rent liability for this
space.
As the end of this first lease term approached, Zango was interested in
extending their lease, but only if they could once again reduce their
footprint, this time to only controlling the 35,000 square foot second
floor. This request was problematic for the landlord, as the building
would then have two non-contiguous vacant floors separated by Zango’s
extended second floor lease.
Since Zango would not be extending their lease on the entire 71,000
square feet, the client’s renewal option was no longer valid, pitting us
in an open negotiating environment with a landlord whose preference
would now be to lease all three available contiguous floors to a single
tenant. To our further disadvantage, the I-90 corridor is a submarket
with one of the highest concentrations of large-space users in the
region- making the building well-positioned for a single occupant.
Services Provided
During the early stages of these renewal negotiations we researched the
market for viable options and found none that rivaled the clear benefits
of Zango continuing in a location that not only emulated the work and
life style of its employees, but also provided tremendous space
efficiencies and economic value to the employer.
After this market review our strategy quickly turned to engaging the
landlord, well in advance of Zango’s lease expiration, and negotiating
from our client’s strengths. Besides being a known entity and
responsible tenant that had built a strong relationship with the
landlord, Zango’s original customized tenant improvements needed very
little new investment for the proposed extended lease term, thereby
providing us with an offer to the landlord of a substantial tenant
improvement savings compared with what the landlord’s most likely
investment would be for a new tenant. Since there would be no
interruption of the landlord’s cash flow if Zango were to extend this
lease, compared to the traditional downtime and marketing period a
landlord faces in releasing a vacated space, this advantage was also
leveraged into our negotiations.
As negotiations proceeded we learned the landlord had been approached by
a publicly-traded company interested in leasing all three contiguous
floors- our main concern. Fortunately, like our client, we had a
long-tenured and mutually respectful relationship with the landlord, and
through this trust were able to secure the landlord’s commitment to
forego their discussions with the competing tenant in exchange for our
quick resolution of the outstanding business and legal issues. This
required us to secure priority service from several of the third parties
we had brought in to assist with this transaction- from the
architectural services firm to the real estate attorney.
How We Added Value
The final lease extension was highly favorable to Zango. The client was
able to consolidate its operations onto a single floor while avoiding
the business disruption and upfront capital cost of a major relocation.
Our negotiations also secured for the client:
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A significant below-market rent
structure, as the lease renewal negotiations started and finished
well in advance of the existing lease expiration. This created a
long-term future rent schedule well below the market rents then
being offered once this extended lease term commenced.
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$200,000 of rent abatement, applied
when the lease extension was executed - eight months before this new
term commenced.
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A $200,000 reduction in the Security
Deposit, applied when the lease extension was executed- eight months
before this new term commenced.
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A landlord-funded tenant improvement
package, providing Zango with a fully independent and operational
single floor, with zero capital contribution by Zango.
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“We have worked with Jason on a number of local real estate
transactions over the past 5 years, and he has been gracious enough
to counsel us on several other transactions outside of the state.
“There are a number of things I
appreciate about Jason, but there are three items that stood out
consistently throughout all the deals he has put together for us:
his involvement in the actual lease document, his pre-existing
relationships with the landlords, and his service and availability
to me.
“Whether there were 5 lawyers involved
or just two, Jason’s had as much input into the actual lease
document negotiations, if not more, than anyone else in the room.
It is obvious he has very solid pre-existing relationships with
landlords and brokers, and I am confident it was these relationships
that made a difference.
“Finally, being a multi-national
company, we work 24/7, and Jason was available for us at all hours.
I can’t stress how much confidence one has when they know they have
direct access to the expertise they need as they work through a
transaction.
“Jason has been a true business
partner over the years and I would and have recommended him to
friends and business partners.”
Ring Nishioka
VP Human Resources |
