A Market-Matrix Case Study
The client, a privately owned Long Island company, was operating out of a 20-year-old leased facility. The high cost of occupancy reflected the poor condition of the facility and its mechanical infrastructure. Market-Matrix was hired to investigate relocation opportunities for the client, with a focus on purchasing a building for the firm to occupy. The challenge was to find a property that could accommodate future growth, provide high occupancy efficiencies, and assure convenience of access for all members of the firm.
Market-Matrix located a 45,000-square-foot warehouse property in Suffolk County, which was acquired for the redevelopment of the client's future facility. The timeframe was very tight, and required significant oversight by Market-Matrix. Among the key services we provided were:
- Leading the client into a new banking relationship, securing a first mortgage and line of credit, which was tapped for capital expenses.
- Securing an SBA504 second mortgage, made possible by energy efficient improvements to the property.
- Connecting the client with a Market-Matrix Preferred Vendor who provided office workstations and furniture with no deposit required, and supplied drawing and planning at no additional expense.
- Connecting the client with a Market-Matrix Preferred Vendor who fast-tracked a significant scope of electrical services, and enabled the client to realize over $30,000 in mechanical engineering savings.
- Facilitating the purchase of an IBM AS 400 co-located server, a transaction that saved the client tens of thousands per year compared to the costs of leasing the equipment.
- Engaging with National Grid/LIPA to secure energy credits, discounts and rebates that are available for high energy-efficient buildings.
The building was delivered with near flawless execution – with just four months from the beginning of demolition to occupancy. Benefits earned by the client as a result of the underlying financial foundation of the project are significant:
- Depreciation and bonus depreciation enabled the client to receive a portion of the rent payments as a tax-free return on investment. Depreciation schedules made it possible to accelerate tax-free income from the building significantly. Upon distribution to the real estate entity, the tax free income was invested in long-term tax deferred investment vehicles.
- Taking advantage of 20-year financing at prevailing rates offered the client significant discounts over comparable capital lease rates. By not entering into any capital lease arrangements, the client earned an increase in current cash flow of over $1.6 million.
- The new facility represents a significant improvement over the prior premises, with high efficiency HVAC and lighting systems, greatly improved air quality, and a state-of-the-art data center connected to a 250 kilovolt natural gas generator, among other state-of-the-art features.