Closing In The Age Of Coronavirus: Pandemic Streamlines 400K SF Phoenix Industrial Transaction
The March 30 announcement of a lease between Westcore and industrial technology company ABB Electrification in Phoenix seemed like an ordinary deal, until you look at it in context.
It was one of only a handful of industrial deals completed in the Valley as the coronavirus spread across the country in mid-March, sending workers home and shutting down swaths of the economy.
Closing the transaction during the onset of the coronavirus was a true once-in-a-lifetime professional experience, Westcore Vice President of Leasing Lauren Suazo said.
In the dozen years since the onset of the Great Recession in 2008, the hard-hit Phoenix market has rebounded by creating the West Valley industrial corridor that has met both the pricing and space niche needed by manufacturers priced out of the Southern California market.
And the West Valley, 8001 West Buckeye Road in particular, was the location of a 400K SF industrial transaction between Westcore and ABB Electrification as attempts to slow the coronavirus pandemic shut down everything from financial transactions to schools to sporting events.
“Two of the most important lessons I learned last month were new ways to look at transparency and communication to get a deal done,” Suazo said. “There were no last-minute discussions of terms that we already agreed to and both parties were fair and reasonable. There was too much going on to put each other in an uncomfortable position.”
Representatives from Cushman & Wakefield, who were unavailable for interview, brokered the leasing deal for the new 400K SF industrial building. The building will be ABB Electrification’s West Coast distribution center for its electrification installation products sector. It is a single-tenant building on a fully secure site, which expedited the already concentrated process.
“We had all of the building specifications they requested,” Suazo said. “People were asking how a deal this size could get done in the middle of the coronavirus closings, even some of our executives expressed their concerns. We had a smaller margin for error so we had to make sure all parties were fair and realistic.”
The onset of the pandemic shook up the normal process for ABB, Cushman & Wakefield and Westcore.
“All internal appeals were done remotely,” Suazo said. “And if a day went by where we did not speak, you would automatically think that the deal was going to be put on hold. We still have to come face to face with other deals that are on hold or fell through, so we did not want this one to end up the same way, we had to get it done.”
Getting it done meant Westcore had to start the design process a lot earlier in the transaction cycle than usual. Instead of waiting for the lease to be signed, Westcore wanted to show faith in the prospective tenant by offering design during the initial lease agreement process.
“It was an obvious risk, but one we had to take to ensure we stay on schedule for building completion at the end of the second quarter,’ Suazo said. “If somehow the transaction did not go through, we were confident we could find a replacement, so it was a well-calculated risk.”
Westcore’s executives helped manage risk by remaining in close and transparent communication with the brokers, who kept the team informed of other deals that were being halted or falling through completely, giving them a better sense of reality of the new environment.
“We had blinders on the last six to eight weeks as we finished the transaction, so our brokers were our guide to the new outside world we were working in,” Suazo said. “The brokers see the ups and downs first since they are well-entrenched in the market. They made sure we knew what was going on.”
Now Suazo and the Westcore team can focus on building projects such as lighting and installing air conditioning units to stay on schedule with the completion deadline late in the second quarter. However, Suazo has found that deadlines, like everything else in our new post-coronavirus society, are day to day in nature.
“With so much unknown in the current situation it is hard to put a timeline on anything,” Suazo said. “I do think the downtime will increase our industry’s IQ and we will come out a smarter industry because of this. We wish it did not occur, but it has so now we have to roll our sleeves up and get more creative and flexible. Not for our pockets, but for the business community.”