Gardner, Inc. is the leading lawn and power equipment parts distributor in the US. Gardner was housed in 65,000 of a 108,000 sq. ft. Class A distribution warehouse at Jacksonville’s Flagler Center. Further sales growth meant that to stay in the building they would need the remaining 43,000 sq. ft., however, it faced two main obstacles to make the desired expansion and renewal. First, the only other tenant in the building, Tenant X, also had motivation to remain in place and expand. Second, the market was well into a recovery from the 2007-’09 financial crisis, a robust economic expansion was underway and, with the local industrial real estate market tightening, rental rates were rising.
Having previous success negotiating the original Gardner lease at 19% below the landlord’s asking rent, and the first renewal also on favorable terms, Gardner once again turned to Collins Industrial Group and team leader Jeff Collins to serve as Exclusive Tenant Representative. One important right Collins negotiated to protect since the original lease was the option to renew with a modest rent escalation formula. This meant Gardner could, at least, renew for the same 65,000 sq. ft. space effectively preempting Tenant X’s expansion plans and then negotiate with the landlord over the rate for the remainder of the building. Collins conferred with Tenant X’s representative to make sure they knew Gardner had a renewal option and would use it if necessary to protect the space it already occupied. Next, Collins assisted Gardner in constructing its letter of intent essentially offering to take the entire building for the same long lease term as the previous two terms, but at a much more favorable rate than the than the current market rent. This commitment would result in 100% occupancy with a credit tenant and long term lease benefiting the landlord and, Collins argued, likely future renewals by Gardner. Collins emphasized the successful track record of Gardner and steady growth making Gardner the best alternative for the landlord compared the Tenant X or a new tenant. After making the successful argument that Gardner was the best tenant for the building, earnest negotiations followed which brought the landlord’s second offer down to the low end of the market rent range. Collins remained confident, however, that Gardner’s strong credit and long term lease would benefit the landlord sufficiently to justify persevering to obtain the still lower starting rental rate originally targeted, which was finally agreed to between the parties.
After reviewing Gardner’s challenges and the current market, the Collins Industrial Group team planned and executed a successful strategy resulting in the following:
- Protected and leveraged the existing renewal option in negotiations to effectively eliminate the competition
- Presented strengths of client and made a persuasive case to the landlord that its value was enhanced due to low risk, long term rental income stream
- Achieved a starting rental rate 8.6% below market rent in a tightening market with rising rents
- Renegotiated the market’s generally accepted annual increase to a 16.7% lower rate of increase
Patient and persistent negotiations achieved all Gardner’s goals, additionally including: refurbishment allowance on the original space and expansion space and, critically, retaining the option to renew to effectively control occupancy rights to the building for a long term renewal leaving Gardner with greater flexibility in the future from multiple choices to: exercise the option to renew, renegotiate renewal terms or, for whatever reason, to vacate.
This has resulted in a strong business position for Gardner and a continued long term relationship with Collins Industrial Group.
“We have enjoyed an excellent long-term relationship with Jeff Collins and his team. From the outset Jeff demonstrated the utmost in integrity and commitment to always serving our best interests. Jeff’s willingness to go the extra mile has yielded significant benefits, financially and operationally, while at the same time allowing us to enjoy a first class building. We look forward to our continued association with Jeff and are confident that our needs and interests will be well taken care of in the future.” Mark Long, Regional Manager – Gardner