Build to Suit for Better Efficiency: NC Rate Bureau Case Study
NC Rate Bureau, Reinsurance Facility and Insurance Guaranty Association (NCRB, NCRF, NCIGA) engaged the services of Rich Commercial Realty three years before their lease was to expire. They knew the building they occupied for 20+ years was not suitable for their current needs. Over that period they had grown into the entire 31,000 sq. ft., two-story facility and there was no room to grow further or create better efficiencies.
They engaged Rich Commercial Realty to assist them with an overview of the market, initially thinking that another lease in a Class B building given the abundant supply of space, would be the best scenario. Several buildings were presented, though many came with their own issues, some of which were created by the financial crisis in 2009-10. Thus it was deemed that a build to suit for lease could provide a new building customized to their specifications in a location that would be optimal for the next twenty years.
After a thorough review of several existing proposals, a possible build to suit option came to the table to address their specific operational requirements. The market for speculative development virtually dried up creating a unique opportunity for a build to suit for lease for the NCRB, NCRF, NCIGA since they would occupy the entire new facility. The lowered risk for the lender and developer and the competitive land cost for various proposed sites provided a competitive rental rate below market. NCRB, NCRF, NCIGA executed a $4+ million triple net lease for a ten year term which will enable the agency to have more control over their operating expenses. Three governing boards voted to approve the new lease terms which allows them substantially greater efficiency and significantly reduces operating costs.
Rich Commercial Realty had previous success with another NC agency and the same developer who understood the need for a quality product that would address the functionality of the organization for the short and long term. Cost was a key component and RCR’s market knowledge of similar property types gave the management team a clearer understanding of the possible options for build to suit for lease. This was a key driver in taking what might have been thought a more expensive option. The tenant enjoyed a cost savings by planning a building that worked for the short and long term, leasing it 100% and enabling the developer to seek funding from sources through a very competitive financing market given the long term credit tenancy NCRB, NCRF, NCIGA afforded.
“Having Rich Commercial Realty on our team to evaluate possible real estate options gave our three boards assurance that we made the very best decision for our Organizations.”
-- Ray Evans, General Manager, NC Rate Bureau