Case Study: Brooklyn Bedding

From Leasing to Owning and Saving on Operation Costs

PROBLEM
In Fall of 2012 Brydant was engaged to deliver a long-term solution for the fast growing Brooklyn Bedding in Phoenix, Arizona. After becoming a number one seller on Amazon.com, the regional (now national) bedding retailer and manufacturer was forced to seek a more optimal operational solution. Brooklyn Bedding was operating out of 3 buildings with a total of 110,000 SF of manufacturing, sales, and office space. Inefficiency costs were crippling their profit margins and order demands.

PROCESS
After expanding the search through off-market facilities, leases for existing facilities were averaging $55-$65/SF for buildings that were 20-40 years old, and would require at least $500K in improvements. Although Brydant had drafted a lease agreement of a 120,000 SF facility, we knew we could deliver a better result for our client. Running those figures through a Lease/Purchase Analysis it was determined that Brooklyn Bedding would allocate $4 Million in lease payments over the duration of the proposed lease term. Although Brydant had negotiated the lease rate below market, owning a facility with monthly mortgage and property expenses would be over 20% less than that of leasing. In addition, we advised that having an owned real estate asset would better fit their exit strategy by adding value to the corporation.


This motivated our solution in the purchase arena.

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SOLUTION
After looking at depreciation, improvements, and pragmatic issues surrounding existing buildings, Brydant
performed a feasibility study for new facility. Although the owners of Brooklyn Bedding were averse to the idea (due to presuppositions of high costs) it was determined that a new 145,000 SF facility could be built with expansion potential, ideal location, and within the time frame allotted for $53/SF including land and built to their ideal specifications. We determined a location that could bypass the $250,000 in municipal infrastructure impact fees and were able to save Brooklyn Bedding over $1.75M in total expenditures and provide a more valuable asset with a full life-span. 
In addition, Brydant helped design the facility to ensure diverse marketability with a more versatile building that could accommodate distribution, multi-tenant, and manufacturing with a retail component for exit strategy options. We secured the land, contractor, and assisted in economic development incentives at the state, regional, and municipal levels.

 

 

“Our new facility has enabled us to increase our productivity by 30-50% while reducing our manufacturing costs by 20%!”
– John Merwin, President of Brooklyn Bedding

 

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