Case Study: Kraus Royal Scot

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Kraus Royal Scot
Lemont, IL | 85,811 Square Feet

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BACKGROUND

Kraus Royal Scot, Inc (“Kraus”), a Lemont based carpet and flooring distributor, had outgrown their existing 63,612 SF warehouse/distribution facility but remained committed to a two year lease term with their current Landlord.  After interviewing several corporate real estate service providers, Kraus hired Jack Rosenberg and Fred Regnery to determine the best real estate strategy to maintain their growth and minimize their real estate costs.

CHALLENGES

•    Determine SF and infrastructure requirements for new facility
•    Currently paying above market lease rate
•    Two year obligation on existing lease—avoid double rent
•    Limitations of current facility constrained business growth

APPROACH

After analyzing Kraus’s current lease as well as prevailing market conditions, we determined Kraus had an opportunity to secure a new, modern distribution facility in advance of their lease expiration by utilizing aggressive Landlord concessions to mitigate their existing lease obligation.

RESULTS

We utilized a Request for Proposal (RFP) process among competing Landlords to efficiently identify the most aggressive landlord in the market.  Our inside knowledge of the institutional investment market allowed us to understand the factors effecting the new landlord’s pricing.  We leveraged this information on behalf of Kraus to determine the most aggressive lease economics the landlord was able to provide.

After negotiating among competing landlords for several rounds, we helped Kraus to secure an unusual 9 month free rent period on a new 7 year lease term in a new construction distribution facility with prominent I-55 frontage. Kraus was able to move to a new constructing building and increase their total cubic square footage by 109% while only increasing their lease rate by 9% in the new facility.