What do you do when your client is too big for any existing building options and the rents for a new building are much too expensive? You think outside the box and break new ground.
Tactix quickly identified a development site controlled by Amtrak next to 30th Street Station, just outside the core Central Business District—what eventually became Cira Centre. This area had been designated by the Commonwealth of Pennsylvania as a Keystone Opportunity Improvement Zone (“KOIZ”) which provides substantial state and local tax incentives for businesses relocating to these zones. However, for this plan to work, Tactix and Dechert had to overcome several obstacles:
- The replacement cost rents for the new Cira Centre building were 50% more than existing office buildings and this was too much of a premium for Dechert unless it qualified for the KOIZ benefits. Unfortunately, the KOIZs had been created with industrial and manufacturing businesses in mind and no commercial office building or tenant had ever qualified for KOZ tax benefits.
- Brandywine needed 350,000sf of committed tenants to proceed with the project and Dechert was only 250,000sf.
- The building had not yet been designed and Dechert’s existing lease was expiring in less than 30 months.
We quickly got to work. First, Tactix and Dechert worked with State officials to creatively qualify Dechert’s tenant improvements for the required investment test thereby clearing the way for the law firm to take advantage of the valuable KOZ benefits. Next, we brought another Tactix client, Woodcock Washburn (now Baker Hostetler), a 100,000sf law firm, into the transaction to co-anchor the building. Finally, we assembled a top-notch design and engineering team to work closely with Brandywine in fast tracking the design of the building and our tenant improvements in order to get them in within 24 months.
In the end, Dechert and Woodcock ended up with a brand new trophy class building that, when taking into account the state and local tax benefits, cost much less than existing Class A buildings. This was a solution that no one contemplated at the outset and no brokerage firm had ever pulled off.
Barton J. Winokur, Esq.