The down market is full of opportunity for start-ups looking to lease office space: Inventory is abundant and prices are low. However, planning ahead and accommodating for the growth prospects of a start-up can be challenging at the time of negotiating a lease, more so if it involves an entrepreneur like Joe Kaplan who has a marked history of outgrowing office space. “What’s challenging about doing a lease for a start-up company is you have to make sure the space can accommodate for growth,” said Gary Wagmeister, principal at Lee & Associates- La North/ Ventura, Inc., who represented Kaplan in the recent five-year lease of 13,465 square feet of office space in Calabasas. Kaplan came out of a short retirement to launch SafeID, an identity theft protection and credit monitoring company which will open July 15. His multiple business ventures have led to the creation of over 1,000 jobs in the San Fernando Valley over the past 12-15 years, Wagmeister said. Kaplan’s former company, Innovative Merchant Solutions, a credit card processing company founded in 1999 and which was later sold to Intuit, began with five employees and grew to 750 employees in 2009. The company presently handles $15 billion in transaction volume annually. Wagmeister, who has worked with Kaplan for the past 13 years, recapped the entrepreneur’s history of outgrowing office space. “When he started Innovative Merchant Solutions I leased him a 13,000 foot building when he had five employees and within a year he outgrew it. We ended up leasing another 90,000 square foot building across the street and he outgrew that. Then 2-3 years ago I leased him 168,000 square feet in Woodland Hills.” So how do you manage that growth? According to Wagmeister the answer lies in option contracts to expand and getting first right of refusal for all different kinds of expansion space, even though, he conceded, many landlords are not too fond of giving options to expand. In this case, the lease agreement was also structured to account for growth. “You can’t afford to pay rent for 14,000 square feet if you just have a few employees, so the deal was structured in a way that his rent starts out very, very low and gradually goes up. By the time the five-year lease is over it gives the landlord pretty much the effective rate that he needed but allows the tenant to have lower rent payments as he’s growing,” he said. There’s also the delicate balancing act of trying to ensure the lease is a win-win for both the landlord and the tenant. “There were probably 30-40 buildings we could have chosen from, (unfortunately the market is terrible right now, there’s vacancy all over the place) but this place worked because the tenant didn’t have upfront costs, the landlord was not required for upfront costs, so the landlord had a comfort level doing a deal with a start-up company. The landlord’s exposure is minimal if this business does not succeed.” And Kaplan could not be happier with the building, located at 26520 Agoura Road in Calabasas. The building happens to be the same location where he first launched Innovative Merchant Solutions in 1999. “It so happened that as we narrowed down the criteria and after looking at several properties, it was the best fit,” he said, adding that the building had remained vacant for the past couple of years. The building, which is self-contained and partially furnished, will allow Kaplan to expand to a maximum of 120 employees. “The furniture that I was sitting in when I launched Innovative Merchant Solutions is the same furniture I’ll be using now. I’m hoping it brings me good luck.” Industry sources reported that the approximate value of the lease is $1.5 million. Retail Sale Marcus & Millichap recently announced the sale of a 4,049-square foot retail property located in Studio City. According to Adam P. Christofferson, First Vice President/Regional Manager of the firm’s Encino office, the asset commanded a sales price of $1,480,000. Brandon Michaels an investment specialist in Marcus & Millichap’s Encino office, had the exclusive listing to market the property. Langdon Apartments Marcus & Millichap also announced the sale of Langdon Apartments, a 40-unit bank-owned REO apartment building located in Van Nuys. The asset commanded a sales price of $2,850,000, according to Christofferson. Brandon Michaels and Daniel Withers were the listing agents. Yair Haimoff of NAI Capital’s Encino office represented JB Partners, LLC in the investment purchase of the 19,515 square foot 40-unit apartment building (Langdon Apartments) situated on 34,896 square feet of land at 8220 Langdon Street in Van Nuys. Studio Plaza Lease Also in June, Lee & Associates announced the lease of 7,500 square feet of space in Studio Plaza, a Ralphs- anchored shopping center in Studio City, for the relocation of National Holistic Institute (NHI). NHI, which operates five accredited campuses throughout California, will be relocating its Encino facility to the center. Total consideration for the 5-year-lease is valued in excess of $1 million. Robert D. Erickson and Trever Belden of Lee & Associates- LA North/ Ventura, Inc. represented the landlord in the transaction. High-End Residential Big estates with celebrity ties have hit the market recently. The sprawling ten-acre Calabasas estate where Jennifer Lopez and dancer Cris Judd exchanged wedding vows in 2001 for what was a short-lived marriage hit the market for $8.85 million. The French Chateau has a circular motor court, six bedrooms, library, family room, den, three ponds, flower gardens, orchards, and infinity pool overlooking the Santa Monica Mountains, to name a few of its attributes. Lou Woolf of Rodeo Realty is listing agent on the property. Avalon Ranch, a 190-acre equestrian estate currently owned by Jim Wilson, an Academy Award winning producer who worked on the movie “Dances with Wolves” is also for sale. The Calabasas property includes a 7,500 square foot traditional farm house two guest homes, a 16-stall barn with full amenities, swimming pool, spa, tennis court with viewing pavilion, secondary barn, utility building, duck pond, expansive pastures and corrals, sand ring, more than 1,000 trees planted, and hundreds of fruit and citrus trees. Jim Pascucci of Rodeo Realty is the listing agent. Asking price for the property is $25 million. Staff Reporter Andrea Alegria can be reached at (818) 316-3124 or at [email protected].
A Broker’s Challenge: Preparing for Tenant’s Growth
