Mullin TBG, A Prudential Company - National Executive Benefits Company

Situation
Mullin TBG, now a Prudential Company with $20B in total assets and 60,000 corporate executive clients, is nationally recognized in the executive employee benefits marketplace. At the time, Mullin TBG was positioning itself for a sale and the owners wanted to maximize profitability. The company’s space was underutilized by almost 25%. It was paying above market rent and had four years remaining on its lease. Occupancy costs were not aligned with the company’s financial goals and objectives. The owner of the building, GE Capital, did not want to take back the excess space, reduce rent or provide rent abatement to the tenant, all of which were important to Mullin TBG. It had recently purchased the asset and was quite satisfied with Mullin TBG’s existing lease terms.

Resolution
Most importantly, Mullin TBG wanted to remain in its space and not relocate. Creating leverage in renewal negotiations was essential to achieve a significant occupancy cost reduction and to convince the landlord it should take back the excess space with no penalty to Mullin TBG. Creating leverage was the real challenge.  GE Capital had no motivation to renegotiate the lease. The net operating income it contributed to the building was significant. Leverage was created by negotiating transactions at alternative buildings that agreed to assume the remaining lease obligation and reduce the tenant’s rent. Further, we were able to convince GE Capital that Mullin TBG would move if it did not renegotiate its lease under very specific terms.  Critical to the tenant’s decision for an early lease renewal was reducing costs immediately and throughout the remaining lease term, which we were able to achieve.  Negotiations resulted in a 33% reduction in occupancy costs during the remaining lease term, which would add significant value to the company in the event of a sale.