Hilcorp Energy Company and Hilcorp Alaska, LLC

48,551 sq ft/Class A building in Anchorage’s Midtown market

Synopsis/Challenge

Hilcorp had taken over a lease from Chevron via Union Oil, whereby they purchased all of Chevron’s Alaskan assets. They later signed a 5-year extension at the height of oil prices, and in a tight Class A market in April 2014-March 2019. Through Cushman Wakefield of Houston, Hilcorp engaged SSS Commercial Real Estate of Anchorage to create immediate cost savings by reducing rent/costs and any other means available.

  • Extremely limited Class A availability (essentially no 50,000 sq ft blocks of space available in the Midtown area, and only two other available buildings in all of Anchorage, both sublets).
  • A landlord who dominates the market.
  • Maintaining favorable legacy provisions and adding new language for reduction and expansion capability, parking, new base year, TI, and a termination option, while executing a brand-new lease.
  • A severely compressed timeline with a drop-dead termination option that was hundreds of thousands of dollars.

Solution

By extensively surveying, touring, and creating chatter in the community about a possible building purchase or relocation, SSS created a scenario and strategy to help convince the landlord that the tenant might soon exercise their termination option and relocate. The key component was a stealth campaign to create local buzz about relocating to another building, or purchasing a building, even though there were no available options that met Hilcorp requirements.

Results

SSS was successful in negotiating a 7-year blend and extend lease with immediate rent savings of over $2 million, and obtained all the other provisions and language Hilcorp desired in a brand-new lease.

Nabors Industries, Inc. & Nabors Alaska Drilling, Inc.

22,511 sq ft/Class A building in Anchorage’s Midtown market

Synopsis/Challenge

Nabors had leased 22,511 sq ft on a long-term lease. They acquired the space over many years and through various transactions to meet the needs of their workforce in the rapidly expanding energy market of the 21st century. Most of the leasing was done when oil prices were at a peak, and in a tight Class A market. Their lease ran through December of 2017. Through Mohr Partners of The Woodlands, Nabors engaged SSS Commercial Real Estate of Anchorage in the second quarter of 2016 to create immediate cost savings through rent/lease relief, and any other means available, prior to the end of the third quarter.

  • Maintaining favorable legacy provisions and adding new language for reduction and expansion capabilities, new base year, maximizing the space for current and future considerations, and new TI, while executing a down-size and extension.
  • A short timeline to realize savings.
  • An unfavorable termination option that was untenable in relation to cost savings.

Solution

By extensively surveying, touring, and allowing the possibility of a relocation, SSS helped to convince the landlord that the tenant might soon exercise their termination option and relocate. The key was to develop a relationship with the landlord, and conjunctively and cooperatively work together to create short-term savings, while keeping a Fortune 500 tenant in place for the long term, and reducing their footprint by more than half.

Results

SSS was successful in negotiating a 65-month blend and extend lease with immediate rent savings (realized in 2016) of over $280,000. In 2017, hey also achieved close to an additional £400,000 of savings on a new lease in a space reduced from 22,511 to 9,807 sq ft that was designed and built for maximum efficiency in a minimal amount of time.