DAMRON
LUCEY
CASE STUDIES
American Youth Policy Forum (AYPF)
Building Sale, Tenant Representation, Lease vs. Buy, Strategic Planning, Consulting
Challenge
AYPF brings policymakers, practitioners, and researchers together to frame issues, inform policy, and create conversations about improving education and young people’s lives.
AYPF occupied and owned 1836 Jefferson Place, NW in downtown Washington DC as their headquarters that they shared with a like-minded organization National Youth Employment Coalition (NYEC). NYEC downsized their DC operation and AYPF had a substantial amount of unused space that was not being utilized.
AYPF hired the team of Newmark to provide a strategic real estate plan analysis to determine the valuation and impact of three scenarios: 1). Stay at the current location and lease the excess space. 2). Renovate the building, market the building for sale and re-locate to a new building. 3). Market the building "As-Is" for sale and re-locate to a new building.
Solutions
After nine months on the market AYPF sold the existing facility at 1836 Jefferson Place NW, to Victor Huang who operates a think tank promoting Taiwanese interests. The sale price was for $3,500,000 or $544/SF. Newmark achieved an 18% increase over existing sales comparables.
During the marketing phase of the building the Newmark team analyzed AYPF’s future space needs and studied the market to find the right relocation option that met the goals and objectives that were desired. After analyzing 38 relocation alternatives AYPF toured five that best met AYPF’s criteria.
Newmark successfully negotiated a long term lease for AYPF at a below market rental rate of $39.00 per square foot, full service on 4,500 SF. The Tenant-Improvement package of concessions contributed by the Landlord more than paid for the cost of the build-out of office space and the furniture. Also, Newmark negotiated 10 months of "free rent" ensuring that AYPF had no out-of-pocket expense from the move and enjoyed almost a year of not paying rent for the brand new office space.
National Community Reinvestment Coalition (NCRC)
Building Acquisition, Landlord Representation, Tenant Representation, Lease vs. Buy, Strategic Planning, Consulting
Challenge
National Community Reinvestment Coalition (NCRC) is an association of more than 600 community-based organizations that promote access to basic banking services including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America’s working families.
NCRC owns 727 15th Street, NW as its headquarters building, occupying approximately 50% of the 46,000 SF building for its own use. NCRC was having difficulty leasing the remaining space due to the economic downturn that resulted in 40% of the building becoming empty.
Additionally, NCRC required help in evaluating the short and long-term implications of owning the asset and deploying significant capital (per their strategic plan) into a new building in downtown Washington, DC.
Solutions
NCRC hired the team of Newmark Knight Frank (NKF) in the summer of 2014 to provide a strategic real estate plan analysis to determine whether to sell the building and relocate. Simultaneously NKF began an aggressive marketing campaign to find tenants to lease the 40% vacancy to provide additional options to NCRC.
In a six month period, NKF efforts resulted in finding tenants to lease a majority of the vacancy increasing the occupancy rate to 96%. In addition, NKF was able to create additional value for NCRC in the form of more favorable lease terms.
As a result of these efforts and increased value, NCRC has hired NKF to market the building for sale as well as find a larger building (approximately 190,000 square feet) to serve as NCRC’s new headquarters and investment property.
In June 2016, NKF successfully negotiated an "off-market" transaction for NCRC that resulted in its acquisition of 740 15th Street, NW for $88.2M. NKF assisted NCRC in achieving their long-term goal of owning a 190,000 SF building just one block from the White House.
Solutions
NCRC hired the team of Newmark in the summer of 2014 to provide a strategic real estate plan analysis to determine whether to sell the building and relocate. Simultaneously Newmark began an aggressive marketing campaign to find tenants to lease the 40% vacancy to provide additional options to NCRC.
In a six month period, Newmark efforts resulted in finding tenants to lease a majority of the vacancy increasing the occupancy rate to 96%. In addition, Newmark was able to create additional value for NCRC in the form of more favorable lease terms.
As a result of these efforts and increased value, NCRC has hired Newmark to market the building for sale as well as find a larger building (approximately 190,000 square feet) to serve as NCRC’s new headquarters and investment property.
In June 2016, Newmark successfully negotiated an "off-market" transaction for NCRC that resulted in its acquisition of 740 15th Street, NW for $88.2M. Newmark assisted NCRC in achieving their long-term goal of owning a 190,000 SF building just one block from the White House.
Family Matters Greater Washington (FMGW)
Building Acquisition, Landlord Representation, Tenant Representation,
Lease vs. Buy, Strategic Planning, Consulting
Challenge
Family Matters of Greater Washington (FMGW) is one of the oldest, nationally accredited social service organizations in the Washington Metropolitan area and has maintained its leadership and reputation of excellence since 1882.
FMGW purchased 1509 16th Street, NW in 2006 as its headquarters building occupying the entire 32,000 SF for its own use. In 2013 FMGW determined the building and its location was not the best vehicle to serve FMGW’s client base. FMGW required help in evaluating the short and long term impacts of their real estate on their strategic business plan.
Solutions
FMGW hired the team of Newmark to provide a strategic real estate plan analysis to determine the impact of selling the building and relocating the headquarters facility. The decision to sell the building was implemented and in early 2015 the building was sold for $14.5M. Newmark sold the property for $2.5M more than market value.
Newmark performed an exhaustive search for relocation options. Based on Newmark’s lease versus buy analysis FMGW decided to pursue lease alternatives and in May 2015 signed a lease for 24,000 SF at 425 Eye Street, NW. The negotiations resulted in a below market rental rate, tenant improvement allowance that included construction of the offices and new furniture and eighteen months of rental abatement at the start of the term.
Special Libraries Association (SLA)
Building Sale, Tenant Representation, Lease vs. Buy, Strategic Planning, Consulting
Challenge
The Special Libraries Association (SLA) is a nonprofit global organization for innovative information professionals and their strategic partners in business, government, academic, and other "specialized" settings.
SLA purchased 331-335 S. Patrick Street in 2003 as its headquarters building, relocating from downtown Washington, DC. It originally occupied the entire 16,000 square feet for its own use. However, approximately ten years later with the advent of technology and widespread use of the Internet, the library industry had changed dramatically. SLA’s office space needs and staffing had also changed with seven staff occupying the entire building. It needed help in evaluating its options moving forward as to leasing out the vacant space to other tenants or selling the building and relocating to smaller leased or owned office space.
Solutions
SLA hired Newmark to provide a strategic real estate plan analysis. An extensive own versus lease analysis was undertaken determining the operating costs of owning the building with the added transaction costs (tenant improvements, attorney’s fees, and commissions) of acquiring new tenants. This was compared to selling the building and relocating to more economical space in both size and occupancy costs. Selling the building was the most cost conscious decision and in early 2016 the building was sold for $4M. Newmark sold the property at a 29% premium above market value.
Although Newmark performed a search for relocation options as part of its analysis, SLA ultimately decided to eliminate its occupancy costs altogether by engaging an association management company to run its day-to-day operations.
American Health Care Association (AHCA)
Strategic Planning, Consulting, Landlord Representation, Lease versus Buy, Building Sale, Building Acquisition, Tenant Representation
Challenge
The American Health Care Association (AHCA) is a non-profit federation of affiliate state health organizations, together representing more than 13,500 non-profit and for-profit nursing facility, assisted living, developmentally-disabled, and subacute care providers that care for approximately one million elderly and disabled individuals each day.
AHCA owns 1201 L Street, NW as its headquarters building, occupying approximately 75% of the 30,000 square foot building for its own use. AHCA had been receiving multiple unsolicited offers from developers to purchase the building, as it is underutilized with the ability to build up to 115,000 square feet on the site. Additionally AHCA’s longtime, full-floor tenant was expiring in May 2018 with a significant amount of rental income at risk.
AHCA required help in evaluating the short and long-term implications of owning the asset and the market implications of selling the building or holding on to it.
Solutions
AHCA hired the team of Doug Damron and Chris Lucey at Newmark in the summer of 2016 to provide a strategic real estate plan analysis whether to sell the building and relocate. An exhaustive analysis of twelve (12) scenarios were evaluated in detail including staying in place and conducting a renovation of the building as well as lease, sale and development scenarios in all three local submarkets (DC, Maryland and Virginia).
Although the sale and relocation scenarios were compelling from a financial perspective, AHCA’s Board ultimately decided to hold on to the asset and renovate it. The building continued to meet the operational needs of AHCA’s staff and it was viewed as a long-term appreciating investment asset for the organization. However, the potential of the full-floor tenant vacating was troubling, as the loss of that revenue would make owning less desirable.
In September 2017, the existing tenant notified AHCA it would be vacating upon its lease expiration as it had outgrown the space. Newmark immediately began an aggressive marketing campaign to find a new tenant. Newmark secured its first tour of the property the same week of notice and converted that prospect into a fully executed letter of intent one month later. This resulted in no down time or loss of income for AHCA and favorable lease terms, stabilizing the asset for the long-term.