In support of a directive to identify and account for the true costs of real estate, this major automotive and transportation client needed to unbundled its third-party logistics (3PL) service agreements to separate the costs of real estate and logistics services.
The push to separate the contracts was a response to Sarbanes-Oxley, as well as a proactive effort to increase control over real estate and 3PL relationships, and to increase the accuracy of expense reporting while reducing costs and limiting risks. Because 3PL providers lack the negotiating power of Fortune 500 firms, they pass through lease rates that are often above market. Bundling real estate and logistics services also limits the ability to change logistics service providers without costly relocation.
As part of its initiative to unbundled 3PL services, UGL Equis negotiated a lease for a 239,428 sq. ft. service center in suburban Detroit while the client negotiated the logistics services in parallel.
On UGL Equis’ request, the 3PL reported its real estate costs separately. The rental rate quoted was nearly three times the asking rent for the building.
UGL Equis research further confirmed that the market would bear a lower rental rate. UGL Equis also determined other lease terms and conditions needed to secure the asset and limit the client’s risks.
The existing contract with the 3PL allowed service to other clients from within the UGL Equis client’s space. For security and privacy, the client wanted to end commingling.
UGL Equis toured the limited number of market alternative sites and requested proposals from the 3PL’s landlord and alternative landlords. These offers were analyzed and the final lease terms were negotiated to the client’s highest benefit.
By working with UGL Equis to negotiate a lease contract separate from its 3PL services agreement, the client obtained the following benefits for one 239,428 sq. ft. logistics center:
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