Sector: Media Company
Lease termination and restructuring
Our client needed to terminate and restructure two of their primary offices in NYC and LA, respectively. Prior to the pandemic, and before engaging Vestian, the tenant had been working with two different real estate companies (one in NY and one in LA) to sublease their space. Neither was successful.
The effect of the pandemic, coupled with the financial impact on their business, made the need to manage down their real estate cost that much more critical. The client turned to Vestian due to our unique and immediate solution. Vestian’s team removed all uncertainty and reduced their costs by more than subleasing their space would yield.
New York, NY lease - Our client was committed to a $12.6 million lease obligation with 4.5 years remaining. Prior to COVID-19’s impact, the client found they no longer needed the space, but were unable to secure a subtenant. One the pandemic hit, and with NYC widely shut down, their chances of successfully subleasing / recovering a reasonable of amount of their obligation decreased significantly. The client, like countless others, had been financially impacted by the pandemic and risked bankruptcy if real estate expenses continued at the same rate.
Los Angeles, CA lease - The client was committed to a $5.8 million lease obligation with 2.5 years remaining on the 22,000sf lease. They found the appropriate amount of space for them was half of their previous footprint (11,000 sf) and they quickly needed to reduce real estate expenses.
Vestian negotiated a buyout to terminate the client’s NYC lease. In LA, Vestian negotiated a lease restructure and had their space reduced from 22,000 sf to 11,000 sf.
In both locations, the strategy was built upon the fact that the tenant was financially impacted by the pandemic. The client’s previous strategy was to sublease both spaces through other real estate companies. Both spaces had been on the market for approximately 9 months. Subleasing became more unlikely as the pandemic caused inventory to increase and demand to weaken. The client faced many unknowns. Vestian’s strategy eliminated the unknown and provided a clear and successful way forward.
NYC lease: The client’s NYC lease was successfully terminated, taking their footprint from 26,000 sf to 0 sf. This dramatically reduced the client’s real estate expenses from $12.6 million obligation to $4 million. This resulted in $8.6 million total savings for their NYC office space alone.
Los Angeles lease: The client’s LA lease was successfully restructured, reducing their footprint by 50% (22,000 sf to 11,000 sf). The client was able to remain in 11,000 sf and did not have to add any additional term to their lease. Overall real estate costs were slashed by $2.5 million (from $5.8m obligation to $3.3m).
- Lease successfully terminated
- Reduced footprint from 26,000 sf to 0 sf
- Greatly reduced real estate expenses from $12.6m obligation to $4m
- Resulting in $8.6m savings
Los Angeles lease:
- Lease successfully restructured
- 50% reduction in leased space
- Reduced footprint 22,000 sf to 11,000 sf.
- Tennant remained in 11,000 sf and did not have to add any additional term to their lease
- Reduced real estate costs from $5.8m obligation to $3.3m