Many people we connect with are very interested to see us break down a “real deal” so we’re very excited to showcase how Otso benefited all of the stakeholders in a recent commercial lease transaction in Austin, TX. This lease highlights how leveraging deposit-free leasing results in positive outcomes for all of the stakeholders involved, tenant, landlord and brokers.
If you prefer, you can simply View the Case Study as a Presentation or Download a PDF
Here is what we will be covering:
- Problem with Traditional Securitization in Commercial Leases
- Introduction to the Parties Involved
- Solutions provided by Otso
- Testimonials from Customers
To start, let’s quickly identify the problems with leasing commercial real estate securitization. For businesses and tenants, putting up cash and other traditional forms of collateral in a lease results in very inefficient uses for their capital. This is true of every business, as locking up cash for years on end (oftentimes without interest) is not only wasteful but also that capital actually loses purchasing power over the term of the lease. Money is far more valuable than being invested in the business, especially in today’s environment.
On the other hand, landlords need collateral to mitigate the risks of leasing space. Building out space, securing a tenant, and paying commissions can be a costly endeavor for almost every landlord. In most markets, collecting enough collateral to minimize risk is a challenge. As noted, tenants are understandably sensitive to put up too much money in a deposit (if any) so one to two months in cash is a “normal” scenario in Texas, even if the landlord would prefer three to six months of rent equivalent. Ultimately these buildings are built to lease space, so the lure of a deal is strong and this results in a significant gap in coverage against risk should any default occur.
So, tenants would rather have no deposit, and on the other hand, landlords want a BIG deposit amount as collateral. We’ll show you how Otso managed to solve this problem in an efficient, secure, and positive way for everyone in the deal.
Now, let’s meet the parties involved!
The Landlord
Notley Ventures is a social innovation organization focused on creating and supporting impactful companies that are tackling some of the biggest challenges facing our communities. Founded by Dan and Lisa Graham along with Matt McDonnell (successful entrepreneurs and investors,) they have built a network of thousands of people across the country.
Part of this mission involves commercial real estate, Springdale General, a 165,000 S.F. office and industrial project located in growing East Austin. Within the project, there is 60,000 S.F. dedicated to social innovation where companies anywhere from 750-10,000 S.F. can office with a group of like-minded businesses and entrepreneurs surrounded by a modern aesthetic and top-notch amenities both on-site and in walking distance.
The Tenant
Immersed is a fast-growing startup that has chosen Austin as their force multiplier to growth. Immersed VR is a company dedicated to providing cutting edge technology for work productivity that removes barriers to remote work. Not only a timely solution in the current environment, Immersed VR has a successful application that allows users to work literally anywhere enjoying high-fidelity environments, multiple monitors, telepresence, collaboration tools, whiteboard, and a customized private workspace to enhance productivity and enjoyment.
You can even type virtually with your hands on supported devices, check out the video here!
Their application is featured on many major VR platforms including Oculus, Vive, and other successful HMD’s. Immersed recently closed a major funding round and has partnered with major tech companies like Facebook to grow their user-base and technology.
The Solution
We were asked to facilitate the needs of Immersed as they considered Springdale General as a potential location for physical offices to grow their organization.
- Springdale General recommended Immersed apply for our lease guarantee program.
- The application was completed and approved all within 24 hours.
- With approval, negotiations started with the nominal guarantee costs “baked into the deal.”
- Through the assistance of both Immersed and Springdale General’s brokerage representatives, they came to terms quickly.
- Immersed and Springdale were able to complete their lease quickly, efficiently, and without the need for any cash collateral.
- Our Guarantee was signed as part of the lease process, 100% via Docusign. Safely, remote, and securely.
- Immersed was able to save thousands of dollars for their business while Springdale General enjoys enhanced coverages against risk.
Testimonials
Sales and Membership Coordinator for Springdale General, Sarah Crowson, had this to say about Otso.
“The ability to offer a deposit-free lease is huge for us, as many of our potential tenants are nonprofits and startups. By marketing our space as deposit-free, everyone benefits: we can differentiate ourselves and attract tenants while those tenants are able to put the money that would otherwise be tied up back into their businesses. The Otso team took every measure to walk us through everything (answering our many questions!) to ensure we felt confident in the agreement/guarantee process and the value it can provide to all parties. ”
Here is what Immersed CEO Renji Bijoy had to say about the process.
“Otso feels like the future. For a company like ours, who fought hard to raise a great round we understand the value of capital greatly. It seemed wasteful to lock up our cash for years on end. When we heard we could avoid this scenario and sign a lease anyway, it was a slam dunk.”
Springdale General is represented by Lexie Hall with Cushman and Wakefield Austin, who had this to say about Otso and its value to her leasing process for her client:
“Otso has created an unparalleled tool to help create a beneficial alternative in favor of Tenants and Landlord’s regarding the securitization of leases. Otso allows Tenants to have capital on hand and assures Landlords that in the event of the catastrophe there will be enough security deposit on hand for all damages. This solution is a no-brainer that I hope our industry will adapt to.”
So, just to cover our bases here, this is what we like to call a win-win-win for every stakeholder (landlord, tenant, and broker) involved in this process.
Please be sure to visit the Springdale General, Immersed VR and Cushman and Wakefield Austin to learn more about what they do and how they’re doing it so well 🙂
View the Case Study as a Presentation or Download a PDF
Learn more about Otso and let’s see if we can be additive to your leasing process next!
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