Phacil was experiencing tremendous growth and was consistently named to the Fastest growing companies in the Washington DC market. Phacil leased 6,000 square feet in a Class A Building in Ballston. Due to their growth the space could no longer accommodate a comfortable work environment. They had over two years remaining on their lease needed to expand their offices to support new contracts. The remaining lease obligation was an obstacle in moving forward with new space commitment.
Consideration & Analysis
David Scheinberg looked at the various options for space disposal and consolidation to establish the most favorable cost and accounting treatment. A new location that met both the operational and cost objectives had to be secured within very narrow constraints. The current submarket (Ballston) was the only location under consideration. David developed a Strategic Real Estate Plan that incorporated space efficiencies, future growth needs, infrastructure requirements, and annual “all-in” costs into the solution.
A detailed space programming exercise revealed that Phacil would be increasing its space foot print by over 300%. After a thorough assessment of the market and supporting financial analysis on both cash and GAAP bases, several options were identified offering solutions in line with the strategic plan. The key creative difference was a lease structure where the new landlord offered an economic package that Phacil could manage given its increase in space, while achieving all of its space objectives. Such a structure led to a removal of the existing lease costs from Phacil’s balance sheet on a GAAP basis and created the flexibility to structure the early move to meet the key financial objectives. The negotiations conducted by David on Phacil behalf resulted in a very competitive market transaction that included rental abatement and allowances for improvements and furniture. The combination of economics and physical attributes allowed Phacil to meet all financial objectives, configure the space to best support its needs and allow for growth in close proximity to its workforce and customer.