Case Studies.Accretive Lease Investment.
Amazon South Lake.
Early tenant engagement provided Peakstone the flexibility to strategically reposition the asset to maximize value, utilizing regional infrastructure and demand drivers to attract a top-tier, investment grade tenant
Amazon South Lake – Herndon, VA
- Challenge: The property was acquired in June 2015 as part of the Signature REIT merger. At acquisition, the property was 100% leased with a 4-year WALT to Time Warner Cable (“TWC”), which had fully occupied the asset since 2009. However, in May 2016, Charter Communications (“Charter”) acquired TWC and shortly thereafter exercised a contraction option for 20% of the building (top two floors), effective July 2017. In January 2017, Charter further advised Peakstone that it would vacate the remainder of the building at lease expiration in July 2019
- Resolution: Through proactive marketing plan and early tenant engagement, Peakstone was able to put in place an investment grade tenant with a 12-year lease
- A marketing plan was immediately put in place and the 10th floor was “white-boxed” to showcase the property’s panoramic views and promote its power generation infrastructure
- In Q4 2017, Amazon announced it was seeking proposals for its HQ2, and Northern Virginia was widely considered a leading contender. In Q1 2018, Peakstone was also made aware that Amazon was considering an expansion of its office footprint in the Herndon area for its AWS division, and Peakstone began a targeted marketing effort to secure Amazon as a full-building tenant
- In May 2019, Peakstone signed a new 12-year lease with Amazon for the entire building. The lease was secured with only 9 months of downtime and the tenant credit profile improved from sub-investment-grade to “AA-” by S&P
- Given the remaining term on the Charter lease, Peakstone negotiated an early termination of the Charter lease to meet Amazon’s space delivery deadlines. Charter paid a termination fee equal to 100% of its remaining rental obligation
- Signed a long-term lease with an investment grade tenant
- Received a termination fee equal to 100% of the prior tenant’s remaining rental obligation