Challenge

AT&T was the sole occupant of the 106,000-square-foot Four Woodfield Lake property in Schaumburg, IL.   However, for several years the company had only occupied and utilized one-half of the property. AT&T had a unique provision in its lease that allowed it to terminate half of its lease five years early. AT&T’s lease rate was significantly above-market and had just announced it was putting 1.5 million square feet up for sublease at its campus in Hoffman Estates, only a few miles away from the Four Woodfield Lake building. Adding to the challenges was the submarket’s all-time high vacancy which had reached nearly 27% at the time. Colliers International was representing the owner, PNC Realty Partners. 

Strategy

The Colliers team recommended to PNC that the strategy should be focused on retaining AT&T or finding another single-tenant user to replace them so the property could remain a single-tenant asset.    It was imperative to creatively structure a transaction that made financial sense for ownership but also included a rent reduction for AT&T. 

The Colliers project team was confident that it could effectively demonstrate to AT&T the benefits of remaining in the property long-term, even if it didn’t have the employees to fill it at that time.

Results

The team structured a very creative financial package that made sense to both parties and AT&T extended its 106,000-square-foot lease for an additional 10.5 years without any additional termination options.  AT&T’s internal benchmarks, such as payback on capital and benchmark against treasury were met, while ownership was positioned extremely well for a future sale with a core asset and long-term high-credit tenant in place for the entire 106,000 square feet.

PNC continues to hold the building in its single-tenant asset core fund.