I hope everyone shares this sentiment, certainly for me, 2016 was a fun year. Professionally, with my partner, Joe, I was able to complete some interesting transactions that created a ton of value for our clients. One of the highlights was a project I worked on with our client, ProAssurance, and its director of real estate, JC Blakely.
We have been working with ProAssurance for several years and as part of that strategic partnership, we monitor their real estate portfolio for opportunities to save them money and/or create value. ProAssurance’s portfolio includes some owned buildings across the country acquired through a various mergers and acquisitions. Recently, some of the operations previously handled out of one of these buildings, a 35,000 square foot office building in Madison Wisconsin, were consolidated to another location. This meant that ProAssurance had an opportunity to sell the building and relocate to an appropriately-sized space in a building with more amenities. The building came with a few acres of cropland adjacent to the building and ProAssurance had been leasing that cropland to a farmer.
We partnered with a local Madison broker with whom we had worked previously — Mike Herl. Because the land and the building were in a developing area of Madison, we thought there was a great opportunity to sell both the building and the land at a great price for ProAssurance.
In order to ensure that there were no negative tax consequences associated with the sale of cropland due to its likely conversion to commercial development, we identified a qualified WI tax lawyer to advise on the process. Once that hurtle was cleared, we placed the property on the market.
Several buyers were quickly identified and two offers were received. We negotiated on the best overall offer while also working to secure leased replacement space for ProAssurance. Because the buyer wanted to close quickly, we negotiated a leaseback post-sale until ProAssurance’s new space could be built out. We were also able to negotiate the sale to the buyer of ProAssurance’s fully amortized furniture inventory.
The building brought a purchase price of $4.7M and the cropland brought an additional $1.75M.
The sale and relocation resulted in a 70% net reduction in ProAssurance’s occupied space in Madison and operating costs were reduced significantly. In addition, in the new location, all employees will be located on the same floor in modern space built to increase collaboration. Finally, ProAssurance will no longer have to provide facility management for a building remotely located and not fully occupied. Working on a team so focused on getting the best result for ProAssurance made all of the challenges associated with selling a building, structuring a lease back on a portion of the space and negotiating for a relocation site worthwhile. It is rewarding to watch it all come together and I can’t wait for the next challenge in 2017!
Photo credit: CommercialSearch.com
