JLAM - Case Study - South Gulph

South Gulph

Case Study: How the Intersection of Agile Investing and Our Conservative Approach Wins the Day

Our South Gulph Road office acquisition’s success was predicated on our ability to identify the intrinsic value of the property, our disciplined negotiating approach, and our agility to respond to changing conditions.

We initially liked the property when it first came on the market. The building met many of the requirements for the Aha Moment that we know leads to differentiation and real estate investment success - simply put, it looked like a place you would be proud to work. It had a forward-thinking design featuring a single-story layout, modern finishes with up to 24’ ceilings, and direct tenant entrances. The efficient design with no common areas provided a significant cost advantage in the market. The surrounding amenities are unmatched, including proximity to the King of Prussia Mall and the King of Prussia Town Center.  And the property offers great visibility and excellent accessibility at the crossroads of I-76, I-276, and the PA Turnpike. 

In addition to the physical elements of the property, the diversified and stable tenancy provided an attractive risk profile. The existing tenants spanned multiple industries (tech, healthcare, and education), industries that tend to require the mission-critical components offered at South Gulph Road and were backed by very creditworthy organizations. This implied stability was enhanced by the existing leases having over 7 years of weighted-average remaining lease term (WALT).  

So a modernized, strategically located, vibrant office property that generated significant, stable, long-term cash flow.  This opportunity certainly aligned with our criteria!

In late 2020, the property was broadly marketed.  We submitted an offer, but the seller selected another group. Two months later, the broker came back to us and asked if we’d be interested because the original deal had fallen apart - and he knew we had the ability to get it done. We were able to mobilize quickly, refreshed our underwriting, and negotiated an attractive deal.

Given our strong track record, the deal profile, and our conservative target capital structure, we created a competitive frenzy among lenders for financing. By following our conservative process, we were able to close financing at the right time, securing a very favorable long-term fixed interest rate that minimized our risk. 

After closing, we put our asset management process in motion. As noted above, the office was already a best-in-class office building in the area with a favorable location.  However, knowing that curb appeal is essential to tenant recruitment and retention, we quickly added the JLAM touch by completing targeted exterior aesthetic improvements to solidify the building’s attractiveness and demonstrate our commitment as an owner. 

As part of our hands-on approach, we held direct discussions with each tenant (both before and after our purchase) about their experience at the building, ensuring that we understood their perspectives, any issues, and prospects for their future tenancy. Building upon these relationships, we negotiated directly with an existing tenant to secure a 5-year renewal that included a 9% increase in their rental rate. By dealing directly with the tenant, we avoided leasing and tenant improvement costs. We also worked with an existing tenant to secure their expansion into the property’s only vacancy. These are examples of our high-touch approach, coupled with our experience negotiating with tenants, which enabled us to quickly add significant value to the property.

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