AKAMAI

Client Situation

Akamai had several unwanted, high-visibility lease obligations, which put a significant burden on cash reserves. The company had tried to mitigate the lease liability with no success.

Akamai hired Columbia Group to review the company’s real estate position in Cambridge, Massachusetts and Santa Clara, California, propose strategies for cost reduction, recommend a disposition program to the company’s executive committee, and manage the negotiations.

Action Taken

Columbia Group worked with key members of the management team to develop a multi-pronged disposition program, which included subleasing, but focused on restructuring the leases. Negotiations with the landlord in Cambridge resulted in a lease termination once a substitute tenant was in place. Negotiations in Santa Clara were more complex, and involved identifying multiple layers of stakeholders and their relative interests; negotiating terms with each stakeholder, including two separate groups that comprised the landlord entity - the real estate operating company, and the institutional equity partner; identifying the pool of mortgage-backed securities that contained this building’s loan, and finally, identifying the special servicer on the controlling tranche of that securitized loan, who could approve a lease restructuring, and recommending terms of an offer.

Outcome

Columbia Group achieved a $138 million reduction in long-term capital leases for Akamai: $100 million in Cambridge, MA and $38 million in Santa Clara, CA. As an added benefit, the lease termination in Cambridge allowed Akamai to relocate to a newer building providing site signage, expansion opportunities, a better location with improved access to neighborhood amenities, and an efficient floor plan more conducive to employee collaboration and communication. This site is now Akamai’s permanent corporate headquarters.