Value Creation Through Dynamic Leasing Strategy

GE Vernova – Longmont, CO

Background & Challenge:

  • 152,218 square foot single-tenant office/flex industrial building in Longmont, CO that was constructed in 1993 and is currently occupied by GE Vernova.
  • Tenant engaged with Orion to discuss a 5-year renewal on the entire building.
  • Tenant considered relocation due to office space reduction and industrial operation expansion needs.

Resolution:

  • Existing Tenant and Orion agreed to a 10-year lease renewal, incentivized by generous Tenant Improvement Allowance to be used for office space reduction and industrial space expansion along with various other building improvements.
  • Tenant has been paying below market rents, and the renewal will bring the rental rate back to market standard.

Benefits:

  • With the execution of a long-term renewal with GE Vernova, Orion benefits from commitment from and Investment-Grade tenant.
  • The lease deal increases the latent building value due to the reduction in office space in an industrial centric market, and Orion was able to maximize cash flows through approximately a 20% increase in rental revenue.
  • Ownership avoided a possible large vacancy, and has eliminated uncertainty around downtime, carrying, and re-tenanting costs.

Portfolio Value Creation Through Capital Recycling

San Ramon, CA

Background:

  • The property is a 97,000 square foot single-tenant flex/lab/R&D facility in San Ramon, California. The building was constructed in 1984 and renovated in 2019.
  • The property is 100% occupied on a double net lease to tenant for a 15-year term.
  • Tenant is a leading agriculture company that is a wholly owned subsidiary of Japanese parent with Japanese credit rating of A+. The property serves as tenant’s headquarters and sole flex/lab/R&D facility in the United States.

Investment Highlights:

  • The property is located in the Bishop Ranch submarket of San Ramon, approximately one hour from the San Francisco CBD. The property is strategically located, proximate to graduate research talent at UC Davis and throughout the Bay Area.
  • Bishop Ranch spans 585 Acres and includes 6.0 million square feet of Class A office space, nearly 10,000 new homes, and a 285,000 square foot retail and entertainment project.
  • The property undertook significant renovation in 2019 for the current tenant, which includes state-of-the-art laboratory improvements and over $20 million reportedly invested directly by the tenant.
  • The appraisal value of the underlying land represents an unusually high percentage of the purchase price and this along with the dynamic local market present a variety of attractive opportunities for Orion to monetize this asset after the tenant’s lease ends.

Benefits:

  • This asset is positioned well due to its proximity to amenities, recent reduction in submarket office supply and specialized use of the property.
  • Due to the capital investments for the renovations done by the tenant, ownership purchased the property at a price well below replacement cost.
  • With the acquisition of this property Orion extends portfolio level weighted average remaining lease term with a high credit, quality tenant.