Spaceworks

Cenveo (NYSE: CVO) / Mail-Well (NYSE: MWL) / Enterprise Press

Commercial printing services

Managing complex company acquisition transactions and related real estate strategies:
• Sale of company to NYSE listed acquirer
• 110,000 SF net lease in Manhattan
• Sublease of 20,000 SF
• Sale of 110,000 SF HQ Building in Manhattan
• Purchase of 40,000 SF HQ Bldg. in NJ
• Placement of $25,000,000 in various tax advantaged “1031” transactions

Challenge

Enterprise Press owned a 110,000 SF headquarters building in the West Village, where the property values had appreciated greatly. They were interested in maximizing the value of their real estate, but they first had to address the needs of the company. Their industry was consolidating; large corporate owners were buying up regional printers to create a national presence.

Solution

We discussed the higher-value uses for their real estate and then introduced Enterprise Press to Mail-Well, a NY Stock Exchange company later purchased by Cenveo. We arranged the sale of Enterprise Press as well as the leaseback of their headquarters to Mail-Well. When Mail-Well consolidated there, we subleased 20,000 SF for them. Four years after the sale, Mail-Well was in trouble and the principals of Enterprise Press bought it back. They then sold their building, and we helped them find a new headquarters in New Jersey.

Results

Pursuant to the sale of their building, we advised our client and arranged for the placement of $25 million of the proceeds into a series of tax-advantaged “1031” real estate exchanges which were diversified by asset class and geography.

SRI – Stebich Ridder International

Fine art installations, storage, and shipping

Hands-on search for space to accommodate goods instead of people.

Challenge

SRI’s requirements were the opposite of what we typically encounter: access to freight elevators and loading docks was paramount while access to passenger elevators was secondary.

Solution

Building agents could not give us accurate information, so we physically inspected and measured each location. After an exhaustive search, we found and negotiated for a full floor at 599 11th Avenue.

As part of our negotiations, we calculated the loss factor and persuaded the landlord to reduce it by 15%, modify the freight elevator openings, and install new doors.

SRI eventually exercised an option in the lease that allowed them to expand onto a contiguous floor under the same terms as their existing lease.

Results

When SRI needed additional warehouse space, we scoured the New Jersey market for rental and sale opportunities, and analyzed a lease-purchase joint-venture proposal for a building then in contract. We leased the space initially and sourced an additional 30,000 SF a few years later. Ultimately, we helped SRI buy one of their New Jersey locations after an eight-year tenancy.

Dylan’s Candy Bar

Candy retailer

Study of the NY/NJ warehouse market for replacement of client’s existing Pennsylvania-based fulfillment operations.

Challenge

Dylan’s Candy Bar was using a 3rd party for fulfillment of their retail operations. They were unhappy with the service and concerned that the vendor would not be able to support their expansion plans. They wanted to understand the costs of bringing the operations in house.

Solution

After performing a needs analysis of their shipping requirements, we compared competing markets and settled on NJ where we sourced a number of properties that met the criteria we established.

We then narrowed down the choices based on their accessibility to the executive who would oversee the operations. We also compared their physical attributes and competing government incentives, and we graphed the projected operating costs inclusive of gas and electricity.

Results

The client used this information to leverage better terms from their existing supplier and renewed their contract—conditioned on an improvement of service.

Eli Lilly (NYSE: LLY) / ImClone (NASDAQ: IMCL)

Pharmaceutical/Biotech Company

Extensive search in the midst of a tight market for a large space (75,000 – 100,000 SF) that could accommodate highly technical specifications.
• 106,000 SF, 22 Year Net Lease
• Negotiated a $200,000 set aside for sprinkler upgrade
• Negotiated away arbitrary signage value to eliminate a sticking point in negotiations

Challenge

Prior to its acquisition by the global pharmaceutical giant Eli Lilly, Imclone—a successful biotechnology and pharmaceutical company—was rapidly expanding operations and needed a new headquarters and research laboratory.

This was a challenging assignment. In the midst of a very tight market, the company was seeking a large block of space (75,000–100,000 square feet) close to their existing offices in Hudson Square. Most significantly, their research laboratories required specialized venting, which few buildings in the city could accommodate.

Solution

After an exhaustive search through typical channels, we pursued an atypical course of action: we sourced a block of space that wasn’t in general circulation and proceeded to create a “building within a building.” The property was owned by United Parcel Service (UPS), which utilized only the bottom floor for its trucking and shipping operations. The building’s remaining floors—vacant for over ten years—had a separate lobby and elevator.

Results

We negotiated a 22-year, 106,000-square-foot net lease that allowed ImClone to build its headquarters and specialized research laboratories less than five blocks from its existing offices in Hudson Square. In addition, we negotiated $200,000 set aside for sprinkler upgrades and calculated a signage value to eliminate a sticking point in negotiations.

Hungry Man

Commercial Television Production Company with offices in New York, Los Angeles, London, Berlin, Rio de Janeiro, and Sao Paulo.

Eliminated client’s existing real estate obligation and arranged a lease for new office space.
• Landlord recapture of 13,000 SF lease/space
• Direct lease of 5,000 SF

Challenge

The client had expanded, but the economy turned, and they no longer needed as much space. They had 13,000 square feet in NY and needed about half of it. They wanted to get rid of the obligation and still maintain a NY presence.

Solution

We recommended marketing half the space to smaller tenants and the entire space to larger tenants. The market was weak, and we wanted to appeal to a wide universe to quickly eliminate their obligation.

We received an offer for the entire space, but when their accountants reviewed it, they recommended waiting for a smaller tenant to take half the space. Rather than move, they thought it would be cheaper for Hungry Man to just stay in the remaining half of their existing space.

Intuitively, this seemed right, but when we examined the underlying assumptions, we found it was actually more expensive.

The following factors were not part of the accountants’ recommendation:
• The market had fallen since Hungry Man had signed its lease. It was now cheaper for them to lease equivalent new space then remain in half of their existing space.
• By subleasing half of their space, they would remain on the lease and be responsible in the event of any failure by a sub-tenant. If they gave back the whole space to the landlord with a new tenant to take their place, the obligation would be eliminated entirely.

Results

Hungry Man gave up their entire space and relocated to a smaller office on the very same floor.

Atlantis Worldwide

Medical equipment dealer

Evaluating competing real estate alternatives to achieve consolidation, cost savings and equity ownership on behalf of client.
• Analyzed key employee commuting patterns, access to markets and government incentives pursuant to a consolidation and move.
• Negotiated the purchase of a headquarters building in Westchester.
• Helped arrange various tax incentives related to the purchase.
• Upon later sale of their headquarters, leased new office space in Manhattan.

Challenge

The client wanted to purchase a building to consolidate its offices with their off-site warehousing, repair, and shipping operations. They were initially focusing on the close-in Queens market because it was close to their existing headquarters in Chelsea.

Solution

We explored the Queens market; but after analyzing the commuting patterns of key employees and taking into account competing government incentives, we presented the Bronx and lower Westchester as alternative options. These areas provided easy access to the company’s key markets, and the real estate was 30%-40% less expensive.

Results

In conjunction with a building purchase, we secured benefits through the Empire State Development Corporation and the Yonkers Industrial Development Agency, which saved Atlantis Worldwide approximately $820,000 over 10 years. The benefits included:
• 90% financing of the building purchase at favorable rates through the New York Business Development Corp. and Small Business Administration’s (SBA) 504 program
• No real estate taxes for 5 years through a Payment In Lieu Of Taxes (PILOT) program
• Forgiveness of the mortgage recording tax (2% of the purchase price) A tax credit of $1,500-$3,000 per employee, per year, for 10 years
• No state corporate income tax for 10 years
• Forgiveness of sales tax on the cost of any improvements made to the property
• State funding at favorable rates for $300,000 of building improvements through Statewide Capital Credit Corp. and the New York Business Development Corp.

Icahn Enterprises LP (NASDAQ: IEP)

A diversified holding company engaged in nine primary business segments: Investment, Automotive, Energy, Gaming, Railcar, Food Packaging, Metals, Real Estate, and Home Fashion.

Study of the market to reposition a non-performing asset.

Challenge

Icahn Enterprises had taken a position in a company and discovered a large non-performing real estate obligation on its books. They wanted to reposition the asset to stop the ongoing losses and hopefully realize a profit. The client invited a number of real estate companies in to propose alternative solutions.

Solution

After studying the physical attributes of the property and the trends then developing in the market, we recommended an incubator/shared working environment. We further recommended that the client run it under their own brand because their financial acumen and reputation would be a major attraction to prospective tenants.

Our proposal was the only one that would not yield a commissionable fee if implemented, and the client resolved to move forward with it. We helped the client prepare a detailed financial analysis of the costs of our proposal as well as a projected revenue stream based on similar operations in the area.

Results

The client ended up selling their position in the company and left the problem of the non-performing asset to the next owner.

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Case Studies

Cenveo (NYSE: CVO) / Mail-Well (NYSE: MWL) / Enterprise Press

Commercial printing services

Challenge

Solution

Results

SRI – Stebich Ridder International

Fine art installations, storage, and shipping

Challenge

Solution

Results

Dylan’s Candy Bar

Candy retailer

Challenge

Solution

Results

Eli Lilly (NYSE: LLY) / ImClone (NASDAQ: IMCL)

Pharmaceutical/Biotech Company

Challenge

Solution

Results

Hungry Man

Commercial Television Production Company with offices in New York, Los Angeles, London, Berlin, Rio de Janeiro, and Sao Paulo.

Challenge

Solution

Results

Atlantis Worldwide

Medical equipment dealer

Challenge

Solution

Results

Icahn Enterprises LP (NASDAQ: IEP)

A diversified holding company engaged in nine primary business segments: Investment, Automotive, Energy, Gaming, Railcar, Food Packaging, Metals, Real Estate, and Home Fashion.

Challenge

Solution

Results