Challenge

In April 2007, CBRE was contacted by United States Playing Card Company (USPC), which had recently undergone a management change. USPC was looking to make significant equipment upgrades and was questioning its current facility’s distribution efficiency.  After engaging a third-party manufacturing consultant, USPC determined the best course of action was to establish a complete relocation budget for manufacturing and distribution. USPC tapped CBRE to provide market information and new construction pricing, which it used to obtain project approval from its parent company.

Once the requirement was established, CBRE was tasked with finding a 500,00 sq. ft. facility with 60,000 sq. ft. of office space that contained HVAC and humidity control with tight variances. Locating a build-to-suit facility was a back-up option, as equipment had already been ordered, and timing was becoming a critical component in the decision-making process.

CBRE identified and informed USPC of two off-market facilities and several speculative distribution centers for conversion, located in sub-markets in Indiana, Kentucky and Ohio. After considering market conditions and working with third-party tax incentives, USPC narrowed the list of potential sites to an existing manufacturing building in Erlanger, Kentucky. At that property, a CBRE client – represented by Jim DePietro of CBRE’s Minneapolis, Minnesota office – was in the process of identifying a sub-lessee to occupy its space.

Solution

CBRE negotiated two sides of a three-way transaction with landlord WP Carey to absolve CBRE Minneapolis’ client of its lease obligation, allowing USPC to directly lease the building with an option to purchase the property.

CBRE’s Cincinnati and Minneapolis offices collaborated to establish market terms for all parties and achieve desired goals for the landlord and both clients.

Results

In the end, USPC signed a 103-month lease for 719,700 square feet at 300 Gap Way in Erlanger, Kentucky. CBRE negotiated an Assignment of Lease, Lease Extension, Fixed Purchase Option and Self-Management Agreement.

CBRE’s Minneapolis’ client was absolved of its lease; USPC acquired a facility fitting its requirements for below-market lease rates with an option to purchase; and the landlord maintained its rate of return while establishing a future exit strategy.