The Challenge

FS Investments (f/k/a Franklin Square Capital Partners), is one of the nation’s fastest growing financial services companies. Due to the company’s rapid growth, FS had taken space piecemeal over a three-year period and found themselves scattered among different floors in a building that had no more space to expand into. With several years left on these leases in Cira Centre (located in a KOIZ), their existing move and expansion options appeared limited. Further complicating matters was that the KOIZ tax benefits were very valuable to FS and they didn’t want to lose them by leaving the building. As of that time, the Commonwealth of Pennsylvania had never allowed a company to transfer the KOIZ qualifications from one KOIZ location to another.

FS wanted to consolidate into one contiguous space that could accommodate growth from 20,000sf to 80,000sf within five years, and provide an amenity-rich, natural light‐filled, and highly flexible and collaborative workplace to catalyze the recruitment and retention of the industry’s best and brightest young finance professionals, including those who historically sought similar jobs and aspired to live in New York City.

The Solution

Tactix was able to negotiate an extremely favorable formula-driven rent transaction with Liberty Property Trust for a new 80,000sf headquarters at the Navy Yard based on a rent/project cost ratio (i.e., lease constant) that was cheaper than the lease constant that had recently been obtained by the larger, better credit tenant next door, GSK, just a few months earlier. In addition, while FS was the sole tenant in the building, we structured the deal so that, for the first several years, FS only paid rent on the square footage they anticipated needing. Finally, and most critically, because of Tactix’s unique finance and legal backgrounds and deep understanding of the KOIZ legislation, we were able to help FS negotiate with the Commonwealth of Pennsylvania to become the first company to successfully retain (and actually extend) its KOIZ qualification moving from one KOIZ location to another. Armed with the knowledge that Brandywine was committed to building a smaller building without us, we had our construction consultants determine the marginal cost of “growing the building” by 11 floors to accommodate FMC. The analysis revealed that the incremental cost of adding these floors was appreciably less than the average cost of the overall project. By presenting FMC’s 11 floors as a separate investment from the remainder of the project they had already committed to, we helped persuade BRT that they only needed to achieve their required rate of return on this incremental cost and not on the higher, average cost of the project. As a result, the rent Tactix negotiated for FMC is 30%-40% less than what the other building tenants are paying and not much more than what FMC would have paid in an existing, older trophy building in Center City.