Case Study

University of California, Office of the President

Education

Savills Saves $5 Million for University of California Office of the President in Satellite Headquarters Lease Renewal

CHALLENGE

University of California, Office of the President’s (UCOP) satellite headquarters operation is located at 300 Lakeside Drive, Oakland, occupying five floors of a 28-story building. Two years in advance of its lease expiration, UCOP commenced its facilities review and procurement process for a real estate partner, as required by the Regents of California.

SITUATION

UCOP retained Savills to represent its interest in assessing and analyzing all conceivable occupancy alternatives in the East Bay, and to structure the best possible solution. Savills negotiated with all finalists, capitalizing on, and leveraging, UCOP’s excellent credit. Savills discussion with UCOP’s existing landlord focused on the landlord’s exposure and vacancy if UCOP didn’t renew, as well as UCOP’s “equity value” in the building vis-à-vis the landlord’s mortgage in the event of a refinance or other transfer event.

RESULTS

Ultimately, the existing landlord acknowledged they could not afford to lose UCOP’s tenancy, and conceded on almost every requirement dictated by UCOP to renew, including cancellation, contraction and expansion options, rights of first offer, rental rate and tenant improvements. The landlord agreed to “turn-key” the entire capital improvement project as well as purchase new furniture for UCOP and install state-of-the-art cabling. In addition, the landlord accepted responsibility for managing the entire eight-phase, nine-month restack project using its internal and external resources, at no cost to UCOP. Our solution yielded savings of $5 million as compared to the next best alternative, provided ultimate flexibility, and allowed UCOP employees to remain in their preferred location for another eight years.

 The existence of newly-developed faculty housing is being used as a recruitment and bonus tool by the CSU system, which anticipates losing 40% of its faculty over the next 8 years. Moreover, the site will also include 1.3 million square feet of university buildings, planned urban development, recreation facilities, retail, and R&D. Proceeds from Phase I-V residential, retail and R&D development will help fund the rehab and development of academic, administrative, arts and recreational campus facilities.