For 20 years, West had been in a 260,000-sf converted industrial facility in Lionville, PA. The space was much bigger than West needed and was tired and uninspired. Management wanted to revitalize its offices and laboratories to project a fresher, more dynamic company that was on the cutting edge of life sciences. They wanted a facility that would inspire its workforce and, ideally, provide them with a competitive advantage in generating new business.
West engaged Tactix to explore both (1) a long term lease extension of its existing lease involving a major space reduction and full blown renovation including significant building and site upgrades by the landlord, and (2) a move to a different building within a fairly circumscribed area that could achieve their stated objectives. Our team quickly determined that no existing facilities were acceptable.
By aggressively competing multiple developers against each other to minimize profit margins, and working closely with West’s architect to downsize its space requirement from 260,000sf to 172,000sf, we were ultimately able to drive down total real estate costs to the point where West could have a brand new facility for not much more than its existing, inefficient headquarters. The new facility accomplished all of West’s stated objectives. It has state of the art laboratories that West highlights when touring prospective customers through its headquarters (which leads to increased sales orders), as well as beautifully appointed offices that maximize collaboration, and class A amenities including a Starbucks coffee bar, a full gym with yoga studio, outdoor dining and recreational offerings reminiscent of a boutique resort.
However, Tactix made sure the economics were also compelling. Recognizing that West’s cost of capital was significantly lower than the landlord’s imputed cost of capital reflected in the final rental rate, Tactix negotiated for a very favorable formula driven rent structure which allowed West to finance some components of the deal itself and thereby minimize rental cost. We also negotiated a purchase option in the Lease which enabled West to acquire the facility at the developer’s actual cost plus a nominal fee. Upon completion, West quickly exercised this option saving it millions of dollars vis a vis the future rent payments and what the facility would have sold for in an arms-length, “market” price sale.