Credit Union of Texas / Credit Union Services Inc.

Client Situation

Studley was engaged by the Credit Union of Texas (CUTX) to identify and implement the best facility solution for its growing business.  After analyzing the data collected during the multiple fact-finding sessions, Studley determined that CUTX required approximately 20,000 square feet of additional space to accommodate a fast-growing business line.  CUTX was in a below-market lease that expired in six years and was concerned the landlord would perceive it as captive and use the expansion requirement to achieve market rates.

Consideration and Analysis

While CUTX preferred that all business lines remain in one building, it approved the idea of having this particular business line off-site if the savings were substantial.  Studley created leverage by soliciting proposals from the existing landlord and nearby buildings in the depressed LBJ submarket.  In addition to a high percentage of available space, rental rates were experiencing downward pressure from the disruptions associated with the High Five freeway construction project scheduled for completion within the next two years.  After several rounds of negotiations, Studley secured a proposal for expansion space in the current location for a co-terminous lease term at rental rates below the existing below-market lease.

Prior to committing to the expansion space, Studley moved into the second phase of the project which was to secure a long-term headquarters solution.  CUTX’s low cost of capital provided the impetus to consider purchasing the existing facility.  However, after several rounds of discussions, the landlord preferred to retain ownership.  At that point Studley negotiated a nine year lease extension from the expiration date with immediate concessions and benefits.  Using sophisticated financial modeling, Studley convinced the landlord that it would be better to agree to a 15 year lease at very low rates that to risk losing CUTX as a tenant.

Result

The resulting lease provided savings of $2.4 million as well as expansion rights on the entire facility at the competitive lease rates.