Repositioning & Adding Value

CHALLENGE

Lineage Asset Advisors was engaged by the owner of Mission Oaks Business Park, a real estate syndicate, to consult on the best ways to stabilize and maximize value on this 79,000 SF multi-tenant office property in Camarillo. At the time of engagement, one of the property’s major tenants (a County Tenant) only had approximately three years remaining on their existing lease. This tenant leased the majority of the property (49,000 square feet) which represented over 62% of the income stream. In addition, the suburban office market in Camarillo was experiencing higher vacancy rates which lead to concerns of tenant attrition. The owner first had Lineage explore a sale of the asset, however investors were either shying away from the investment or discounting the value significantly due to uncertainty around whether the major tenant would stay or vacate. Owners were concerned that if either of the two major tenants in the building moved out that they would have a hard time back-filling the space.

SOLUTION

Lineage Asset Advisors provided strategic guidance to the owner to aggressively pursue an early lease extension with the major tenant which would help to stabilize the asset. Over the course of the next year, Lineage engaged in a lease negotiation for a seven-year lease extension. The negotiation included an approximately 5% rent increase in exchange for capital upgrades to the building and tenant improvements in their suite. The upgrades also included energy efficiency projects such as updated lighting.

OUTCOME

Lineage was able to secure the seven-year lease extension which resulted in a total lease term of ten years with a credit tenant in the building. The certainty and stability created by this lease extension allowed the owners to more confidently position the building for maximum value in the marketplace. Ultimately, the owners decided to sell the asset and Lineage was able to execute a sale of the property at a price that added approximately 20% more value than before the lease extension.