The City was experiencing budget issues as a result of decreasing municipal revenues. The Mayor had challenged each of its departments to identify immediate cost saving opportunities. The Department of General Services, responsible for the City’s real estate portfolio, had previously engaged UGL Equis to prepare a consolidation analysis to determine the potential savings, both in terms of real estate and personnel, that could be achieved by consolidating its facilities.

In this regard, UGL Equis was retained by the City to assist in reducing its real estate costs.

Given UGL Equis’ insight into the City’s entire portfolio, we identified an opportunity for the City’s largest leasehold interest, located at 30 North LaSalle as a potential restructure candidate. UGL Equis developed a negotiation strategy that took advantage of the softening real estate market and a landlord whose national occupancy levels were spiraling downward.

The landlord, the country’s largest publicly traded REIT, was very concerned about the negative effects of decreasing occupancy on its stock price so it spearheaded a national initiative to raise occupancy levels. Knowing that the landlord would not want to lose such a high-profile tenant, UGL Equis leveraged this information and negotiated lease terms that provided for immediate financial saving to the City, even though its lease did not expire until the 3rd Q of 2005.

Through UGL Equis’ efforts, the City obtained a new lease, retroactive to January 1, 2003, that provides approximately $450,000 per month in savings through mid-2005.

Additionally, the City secured a tenant improvement allowance payable in 2005 along with a market rental rate beginning in 2005 that is based on today’s soft real estate market.

In total, UGL Equis’ negotiation strategy saved the City in excess of $14 million for the period of 2003-2005, accomplishing the Mayor’s objectives of reducing budget pressure.