High associated costs: significant capital invested within the warehouse, resulting in high relocation and make good costs if exiting the premises.
Limited supply of sites: due to the limited availability of vacant sites, it was not practical to accommodate a consolidated facility due to approaching critical dates.
Rental increases: rents in the surrounding precinct had increased by 30% to 40% within 18 months.
Limited lease: owner was intent on re-developing the asset and sought only a 5-year lease extension.
TMX worked to outline a response that identified the core problems, and reviewed them to come up with a suitable solution:
- TMX were able to create a level of competitive tension by going to market and considering multiple relocation alternatives.
- Established a list of lessor works to improve both the functionality and environmental sustainability of the asset.
- In a market favoring the lessor, TMX utilized local market intelligence (off market evidence) to quantify the commercial terms and conditions we were looking to achieve for Essity.
- Formalized the lease extension within a swift timeframe, liaising with Essity’s local in-house legal and finance teams.
They don’t only know their stuff, but they are very engaged and come back to me really quickly. If I leave a message, its’ never ringing back the next day, it’s that day and often within the hour.
- Secured a net effective rental rate of $93 per sqm, equating to a 12% discount from the owners starting position.
- Negotiated a 10-year initial lease term which gave long term certainty of tenure to Essity.
- Agreed on a future fixed rent review structure, preventing Essity from being exposed to a highly inflationary economic environment.
- Lessor works (in addition to the incentive) included upgrading the solar system, reducing on-going operating costs.
- Significantly reduced the existing make good obligations, easing future requirements upon Essity exiting the premises, where they are only required to clean up rubbish and remove fittings.