Ann Arbor's Advanced Photonix extends lease on Boardwalk office

Area commercial real estate brokers and landlords are rumbling about cutting occupancy costs for tenants who want to stay in their buildings - or coming up with great deals to lure new tenants from the limited pool of companies shopping for new space.

Here's one very public example of how that's playing out for Advanced Photonix Inc., which has made 2925 Boardwalk (see map) its longtime home in the city.

The publicly held company [AMEX: API] issued a release this morning describing its latest lease renewal for the 50,000-square-foot building.

The previous lease kept the company in control of the building through May 2011, with two five-year options that tied rental rate increases to the consumer price index. And it came with a right of first refusal to buy the building.

The rate wasn't disclosed.

But the new lease suggests that the market rate for a new building in 2001 - and the CPI increases tied to that - have zero bearing in today's commercial real estate market, where Ann Arbor learned last week that the overall vacancy rates is a decades-high 17.62 percent, according to Swisher Commercial.

The new rate: well, it's not disclosed, either. But the savings to the company is $1.6 million - or about 19 percent.

Terms include:

â€¢ A lease extension through May 2021.
â€¢ An option to buy the facility on May 31, 2016, for no less than $7.1 million.

It also keeps the company - which develops advanced semiconductor materials - in Ann Arbor.

From the statement:

"This represents a significant cost savings for the Company in these
challenging economic times, preserves our substantial investments in this
unique facility, and ensures our ability to make future investments to
support our long-term growth objectives without the expense and disruption
of relocating to another facility," said Rob Risser, Advanced Photonix's
Chief Financial Officer. "We expect the savings to begin to be reflected in
our results in the first quarter of 2010."

The building - close to East Eisenhower near the State Street intersection - is owned by Jagar LLC of Farmington, according to the city's records. Its state equalized value is $2.9 million, which represents an estimated market value of just under $6 million.

At least under the old lease terms. Based on the income the property is generating, that could drop by 19 percent, too.

Paula Gardner is Business Director of AnnArbor.com. She can be reached by email or 734-623-2586.