Case Study: Arvato Digital Services

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Overview

Arvato Digital Services ("Arvato"), a division of Bertelsmann AG and a well-known provider of services and solutions to businesses in the IT/tech, video, and audio sectors, was seeking to reduce their occupancy costs in their 534,000SF WI distribution facility and extend their lease term. Arvato was committed to their lease for 12 months at an above market lease rate. Additionally, the corporate structure of the company prevented them from committing to a long-term deal. The company also desired to remain in the immediate area because of the availability of labor for their large seasonal swings. Operating under these restrictions, Jack and Fred identified an opportunity to reduce Arvato's lease rate retro-actively and created a process to achieve results that exceeded their savings estimations.

Approach

Jack and Fred performed a detailed analysis of all competitive buildings available in the sub-market. By identifying a landsite that was not currently being marketed, Jack and Fred identified an opportunity to time the delivery of a new construction, modern distribution building that would coincide with Arvato's lease expiration in 12 months. The resulting lease proposal for the new buildings represented a significant cost savings compared to their current building. Utilizing the new building as leverage against their current landlord, Jack and Fred were able to use the probable threat of Arvato leaving to substantially reduce the lease rate at their current building and extend the term for 3 years rather then the landlord preferred 5 years.

By identifying the low-cost alternative in the market and creating a scenario where Arvato might leave to a new building at a lower rate, Jack and Fred were able to renew and extend Arvato at their current, preferred location at a substantial savings. Aravto received a $400,000 rent reduction for the remaining 12 months of their lease term and extend their current lease for 3 years at a 20% annual savings. Additionally, the landlord became responsible for $200,000 of deferred building maintenance which had previously been Arvato's responsibility.

Results

In an extremely tight market, Colliers Bennett & Kahnweiler identified a rare piece of available Lake County land for the headquarters building, a seven-acre site in Lincolnshire near Milwaukee and Rt. 22. The Colliers B&K team facilitated the design and bidding process, negotiated the land sale and construction contracts, which led to McShane Construction’s engagement to building the 127,000 SF corporate headquarters building.  The facility is currently under construction and will house approximately 250 employees at the time of its completion in the first quarter of 2006.