Case Studies

Challenge:
As one of the largest construction companies in the nation, McCarthy’s Northern California office was experiencing substantial growth from the expansion of technology, the health science sector and a general real estate boom. This influx of business gave rise to an urgent need to expand from their current one-floor office space in a downtown San Francisco high-rise. As such, TRI Commercial was tasked with finding a new office space for this client which could accommodate a burgeoning business, while also satisfying McCarthy’s desire to transform their work environment to foster creative collaboration and improve synergy. This challenge required relocating to a completely new, separate facility from McCarthy’s existing conventional high-rise space.

Strategy:
Having now defined a clear goal for their next office, (which was in direct competition with technology and creative firms, the fastest growing segment of Northern California businesses), the approach to secure the winning bid for such in-demand space was going to require a complex plan of attack. Drawing upon years of established relationships with owners and listing brokers, TRI quickly identified creative spaces that McCarthy could feasibly pursue in the bidding process. Once that was accomplished, TRI had to then convince ownership how McCarthy distinguished themselves from other bidders. TRI knew it could favorably separate McCarthy from most of the newer technology companies by emphasizing McCarthy’s long-standing reputation and solid financial wherewithal.

Results:
​Once TRI identified a unique creative space at Levi’s Plaza which McCarthy was eager to lease, TRI leveraged its existing relationships with the owner and the owner’s broker, with whom TRI had completed several significant transactions of over 20,000 square feet. Although TRI submitted a letter of interest very late in the marketing process and ownership warned that substantial progress had already made with another company, TRI successfully negotiated for McCarthy’s proposal to be considered. Upon making further strong arguments to the ownership regarding the merits of McCarthy’s proposal, TRI was able to ascertain information which enabled McCarthy to guide their negotiation toward the salient points desired by ownership. TRI’s savvy and persistence eventually allowed McCarthy to leapfrog the initial deal on the table and come to mutually acceptable terms with the ownership; thus resulting in a win-win deal for both McCarthy and Levi’s Plaza.

Challenge:
San Francisco remains a premier place to do business and Taulia Inc., a cloud-based invoice, payment and discount-management software company, chose to establish its headquarters in San Francisco in 2009. Taulia felt it was important to have a centrally located office with access to public transportation and urban amenities that would help with recruiting new staff. Unfamiliar with commercial real estate in San Francisco, Taulia executives partnered with Mark Gedymin of TRI Commercial to represent them after they had crossed paths at one of Gedymin’s listings. The challenge was to find a short-term lease within the current real estate supply that could meet their immediate needs. Initially Taulia subleased 1,246 square feet space in the Merchants Exchange Building on California Street and in 2011 relocated into a 3,369 square feet subleased space at 100 Pine Street.

Strategy:
Anticipating a round of funding and sensing an uptick in San Francisco’s commercial property market, Taulia realized it would need more space to meet its business objectives. TRI suggested in 2012 that the firm consider a short-term sublease at 420 Taylor Street which had been renovated in a creative, open-space design style that was suitable for their culture. Though affordable, the location was not ideal in that it was on the fringe of the financial district. However, the 8,585 square feet of space was an attractive deal at the time. The ultimate goal, however, was to find a permanent home in the financial district.

Results:
​Recognizing that a traditional lease requires long-term commitments, Gedymin understood that the rapidly evolving business structure of most tech companies prevents them from meeting traditional real estate expectations by signing multi-year leases. Thus in 2013 TRI found 16,297 square feet of space at 201 Mission Street on the 9th floor and when the 10th floor became an option for contiguous expansion, they leased that 15,608 square foot floor. Concurrently, Taulia extended their initial term on the 9th floor and then completed a short term sublease on the 10th floor with Fitbit.

TRI’s Gedymin has represented Taulia over the course of six years and brokered five different transactions, including a referral to a lease in Utah.

Client: Bob King IHOP 

Challenge:
In 2001 and 2002 a New York-based investor bought more than 35 newly constructed IHOP restaurants from DineEquity Inc., which is the corporate entity that owns the International House of Pancakes restaurant chain. This portfolio was absolute, triple-net leased to the publicly traded restaurant operator with 25-year primary lease terms with options. After several years of ownership with steady annual returns, the investors sold off most of the assets and had nine IHOPs remaining in their portfolio that they wanted to sell and exit their investment. The greatest challenge in selling these restaurant properties was the timing – it was 2008 and America was in its worst economic slump since the Great Depression. The sellers had been through previous recessions and wanted to work with a senior level broker who had similar life and business experiences to sell the properties.

Strategy:
Due to capital gains issues and the desire by the sellers to 1031 Exchange into other commercial properties, Bob King, CCIM, in TRI Commercial’s Roseville office advised his client to limit the property sales to two or three per year. The IHOPs were located in high-volume traffic areas in California, Washington State, Virginia, Texas and Connecticut. Marketing the properties was very important and required getting sales information out to the brokerage community, all triple net retail brokers and investors. Creating an excellent and compelling sales package was key.

King had to convey the quality of each IHOP building and location and appeal to investors that wanted high-performing underlying real estate value and safe investments. Getting the story out about these absolute triple-net leased real estate assets backed by a high-credit NYSE company is as close to a guarantee one could get became paramount in the offerings, especially due to the incredible recession and credit-crunch environment.

Results:
With the California economy the first to begin to emerge from the recession, King started selling IHOPs in California first. Even then, it took about seven months to sell the first property. In addition to marketing the properties via traditional channels and his CCIM network, King also contacted other IHOP owners that had confidence in the IHOP brand and asked for referrals. Three of the properties he sold in conjunction with CORFAC International affiliates based in Seattle, WA, Fort Worth, TX and Danbury CT. On average, the IHOPs sold near $3 million each and while capitalization rates varied per transaction, most of them were in the 6.5% range. King closed the last sale of the nine IHOPs in August of 2012. It was located on Boston Post Road in Orange, CT, near Yale University.

Client Name: Tomanek Group

Challenge: To market and sell a Class C apartment asset achieving a market price within a short time frame allowing the seller to facilitate an exchange. The property to be sold was under a HAP Contract governing 40% of the units, a regulatory agreement requiring owner/seller obtaining city approval of sale and a development agreement requiring the owner/seller to pay for undergrounding of overhead utility wires.

Strategy: A Listing Agreement allowed John Gallagher, CCIM, CPM and an apartment broker with TRI Commercial, to expose the investment opportunity to the market by distributing information to prospective buyers and brokers. An offer from a qualified buyer with HUD experience not only satisfied pricing criteria but also facilitated HUD’s assignment approval of the HAP Contract. Due diligence was expedited under the terms of the contract and financing was not a condition of sale. The buyer and Gallagher working through various city departments were successful in obtaining approval of the sale, an obligation of a 20-year old regulatory agreement. John sourced an underground utility consultant who provided valuable information needed to diminish the financial exposure to the seller and buyer which reduced this obstacle to a mutually acceptable number.

Result: The seller successfully closed on this acquisition within the targeted date. The seller was able to satisfy their objective disposing of a Class C apartment asset and investing their net-sale proceeds via 1031 exchange into a Class A apartment asset. On date of sale, the price was considered at or above market for the condition and location of the asset.