Bacille Joins UBS as Global Head of Real Estate

Peter Bacille has committed to joining UBS as global head of real estate, leisure and lodging in mid-June of 2012, coming to the Switzerland-based financial-services company from JP Morgan. Bacille joined JP Morgan in 1986, was named head of real estate M&A in 1995 and managed their domestic real estate, lodging and gaming business from 1997 until his departure in March 1998. In April 1998, he joined Chase Manhattan to become global head of real estate where he was given responsibility for real estate, building a real estate equity investment platform, and shared responsibility for the CMBS business. Bacille retained his role as global head of real estate through the acquisition of JP Morgan by Chase Manhattan in 2000 and was additionally given joint responsibility for the JP Morgan Chase general-industrials business in 2007. Upon the acquisition of Bear Stearns, he was promoted to vice chairman and became responsible for many of the firm’s largest clients.

White to Retire from CBRE, Sulentic Named CEO

Effective Dec. 31, 2012, Brett White will retire as CEO of CBRE Group Inc., and current president Robert Sulentic will succeed him. White was re-elected to CBRE’s board on May 8, 2012, and will remain in that role after his retirement. As president, Sulentic has had direct responsibility for all the company’s business lines and operating segments since 2009. He also served as CFO in 2009 and, previous to that role, worked as group president with responsibility for the EMEA, Asia Pacific and development-services businesses. Sulentic joined CBRE in 2006 with the acquisition of Trammell Crow Co., where he was serving as CEO. CBRE’s corporate headquarters will remain in Los Angeles. “We … have achieved the long-term vision of becoming the world’s leader in commercial real estate services,” White said. “This is good news for CBRE, our clients, employees and shareholders. It is also good news for me, as I can embark on my next business chapter at a time when the company is in the best possible position.”

Brookfield Announces Two Executive-Management Changes

Brookfield Office Properties announced three new roles and promotions within its executive-management team in anticipation of the launch of majority owner Brookfield Asset Management’s global real estate portfolio. Current CEO Ric Clark was named chair of Brookfield Office Properties, relinquishing his title as CEO of the New York-based office REIT. Clark will now become CEO of the new entity, Brookfield Property Partners. Dennis Friedrich, the current president and global chief investment officer who has more than 10 years of tenure with the firm, will take Clark’s place and become the CEO of Brookfield Office Properties. The changes will become effective on July 1, 2012. Brookfield Asset Management, owner of Brookfield Office Properties, plans to introduce its global portfolio of commercial and other types of real estate as the new public entity, Brookfield Property Partners.

CBRE Names Three New SVPs

Stuart Siegel has joined the CBRE Group Inc.’s Midtown Manhattan office as a senior vice president in office brokerage. Prior to joining CBRE, Siegel was an executive managing director with Grubb & Ellis New York Inc., where during his nearly 20-year tenure, he established himself as one of the firm’s top producers nationwide and was nominated for the Real Estate Board of New York’s “Ingenious Deal of the Year Award” in 2005.

Additionally, Joel Wechsler has joined the company’s Downtown Manhattan office as a senior vice president. Throughout his career, Mr. Wechsler has represented many high-profile clients, including Ares Capital Corporation in its 65,000-sq.-ft. relocation to 245 Park Avenue; Godiva in its 45,000-sq.-ft. headquarters relocation to 333 West 34th Street; Fortress Investment Group in its 115,000-sq.-ft. relocation and expansion at 1345 Avenue of the Americas; Stifel Nicolaus in its 60,000-sq.-ft. consolidation of its New York City offices at 237 Park Avenue, and Arthur J. Gallagher, in its 35,000-sq.-ft. relocation to 250 Park Avenue.

Malcolm Randolph has been promoted to SVP of the company’s Richmond office. Randolph has more than nine years of experience in the commercial real estate industry. He joined CBRE in 2003 as an associate broker with a primary focus on the marketing and leasing of Class A office and flex buildings. In 2009, Randolph was promoted to vce president. Randolph has facilitated transactions representing both landlords and tenants; and in the process, he has advised corporations in lease negotiation, relocation, acquisition and disposition of a variety of property types.

Leventhal

It can be very simply put: “Ken was a visionary,” Stan Ross, chairman of the University of Southern California Lusk Center for Real Estate, said to Commercial Property Executive about his longtime friend and colleague, the late Kenneth Leventhal. Leventhal, a former partner with Ernst & Young L.L.P., was a trailblazing certified public accountant who brought the business of real estate-specific accounting to the forefront. He passed away May 8, at the age of 91.

“Aside from being a great leader, his vision was that you could build the world’s biggest and best accounting firm specializing in real estate,” said Ross, also a former vice chairman of real estate industry services with E&Y. And more than a half-century ago, Leventhal set out to do just that. In 1949, he and his wife, Elaine Otter, opened Leventhal & Co. in a spare room in their apartment and did not look back. He recruited the best and brightest and kept a razor-sharp eye on his goal of creating a company of business experts dedicated to providing solutions to clients in the real estate industry.

“He was very focused on a goal and a mission, and his enthusiasm was very convincing as to his potential success,” said Ross, who became fast friends with Leventhal in 1961, working side-by-side to build the business. “You had confidence in him.”

Leventhal & Co. offered a range of services to real estate companies including guidance on such matters as cost-saving measures and operating efficiencies, as well as intricate reorganizations. In its capacity as a workout specialist, the firm advised such real estate heavy hitters as Donald Trump, hotel developer John Portman and shopping mall builder Edward DeBartolo. The government even turned to Los Angeles-based Leventhal & Co. The firm counseled the U.S. Resolution Trust Corp. — the government entity created to manage and resolve failed thrift institutions that had gone into receivership as a result of the late 1980s thrift crisis — on the disposition of billions of dollars of assets belonging to the insolvent entities.

“The impact he leaves on the industry was the importance of analytics and the importance of understanding and doing the appropriate due diligence, and having the discipline in evaluating the real estate activity whether it was strategic or whether it was a single project or a capital markets fund,” noted Ross, who became managing partner of Leventhal & Co. in 1990. “But he also would provide guidance, looking at various options and alternatives so that you could measure those. He leaves a lasting imprint on the importance of financial accounting and tax in the industry.”

Leventhal & Co., which eventually held the distinction of being the real estate industry’s leading CPA firm, merged with E&Y in 1995. And in 1999, 50 years after having created his own firm, Leventhal retired from his position as partner at E&Y. But he kept close ties as chairman emeritus of E&Y Kenneth Leventhal Real Estate Group, and remained a frequent presence in the firm’s Century City office in Los Angeles. “Kenneth Leventhal had a profound effect on our industry, our firm and on me, personally,” Howard Roth, leader of E&Y’s global real estate practice, noted in a prepared statement.

In addition to his strong presence in the accounting and real estate industries, Leventhal made a big impression in what could be described as his second career: philanthropy. A member of the USC Board of Trustees since 1977, he and his wife made a donation of $25 million to the university, which honored him by renaming its accounting school the Elaine and Kenneth Leventhal School of Accounting in 1996. And in 2003, Leventhal turned heads when a 10-year fundraising campaign he had chaired reached completion with nearly $2.5 billion in what is widely held as the most successful fundraising endeavor in higher education. “Through his wisdom, generosity and philanthropy, he created enduring legacies,” stated William W. Holder, dean of the Leventhal School of Accounting. “Ken Leventhal was one of the giants on whose shoulders we now stand.”

Leventhal is being touted as a pioneer and a maverick, and much, much more. “Ken to me, aside from being a surrogate father, was my mentor; he was a teacher and he was a coach,” Ross said. “I call him an icon and a legend that is just irreplaceable.”

On Friday, CBRE Group Inc. made four huge personnel pickups, with Harold Holliday, John Fenoglio, David Aaronson and James Richards joining the firm as executive vice presidents. All four will be based in the Houston office and will work on debt and equity-financing deals for clients in the region.

Brian Stoffers, president of CBRE’s debt and equity finance division, called the four “more than industry leaders” and said they were men who “define a culture of collaboration and excellence that lenders and borrowers have appreciated greatly. They join CBRE from Grandbridge Real Estate Capital.

Holliday has nearly 40 years of experience in mortgage brokerage and earned a national reputation as a co-founder of Holliday Fenoglio. Following HF’s acquisition by AMRESCO in 1994, he was charged with growing that firm’s commercial mortgage-banking business. After AMRESCO was sold to Lend Lease in 2000, Holliday joined Live Oak Capital with several former colleagues and partners. Grandbridge acquired Live Oak in 2008 and he served there as a senior vice president. He is a past member of the commercial board of governors of the Mortgage Bankers Association.

Fenoglio, with nearly four decades in the mortgage banking industry, was also a co-founder of Holliday Fenoglio. Under his leadership HF became one of the largest commercial banking firms in the U.S. Following his retirement from that firm in 1998 he became a principal at Live Oak Capital. He has been a guest lecturer at Texas A&M University, Rice University and the University of Texas. He is a member of the Mortgage Bankers Association and the International Council of Shopping Centers.

Aaronson was a top producer at HF with responsibilities including debt originations, joint venture and equity placement, investment sales and investor relations. He was a co-founder of Live Oak Capital. Aaronson has a B.A. from the University of Texas at Austin and has served as a guest lecturer for Rice University.

Richards served 15 years as the managing director of the Houston office of HF. He has been an active originator of commercial real estate transactions in the mortgage banking sector for nearly three decades, and has an M.B.A. from the University of Houston and a B.B.A. from the University of Texas at Austin.

HFF has gone through a number of name changes in its lifetime, with the company first conceived as Fowler, Goedecke & Co. in 1974. In January 1998, all related companies unified under the Holliday Fenoglio Fowler L.P. banner and, in January 2007, the firm went public on the NYSE as HF.

Anyone who keeps a close eye on Duke Realty Corp. might have experienced déjà vu last fall. In December, the Indianapolis- based REIT wrapped up one of the year’s biggest portfolio transactions: the $1.1 billion sale of a geographically diverse portfolio of suburban office assets to an affiliate of the Blackstone Group L.P. Completed in December, that transaction was the biggest milestone yet in Duke’s strategy to transform its portfolio into majority industrial and exit many of its suburban office markets.

Six years earlier, in September 2005, Duke completed the $1 billion sale of a geographically diverse portfolio of flex industrial facilities to a joint venture of First Industrial Realty Trust Inc. and the California State Teachers Retirement System. That sale, which involved a 14.4 million-square-foot portfolio in the Midwest and Southeast, was also the centerpiece of an exit strategy as Duke moved to dispose of its flex assets. The names, property categories and market conditions changed considerably in the interim, but the two deals share striking similarities. Besides their scale and institutional players, both transactions were milestones of strategies to remake Duke’s portfolio. And both display the distinctive stamp of Denny Oklak, the 26-year company veteran who has served as CEO since 2004. As Duke marks its 40th anniversary this year, Oklak is overseeing a transformation that is on pace to reach the finish line well ahead of schedule.

When the makeover is complete, Oklak will have expanded the company’s footprint in the industrial and medical office sectors and pared down its office holdings to the most reliable markets. “He’s not been afraid to push the envelope and take the company in directions that it has not gone in before,” said Guy Metcalfe, managing director & co-head of real estate investment banking for Morgan Stanley, who has advised Oklak on numerous transactions. For future growth, Oklak is eyeing Southern California and other prime ports and logistics centers.

Duke’s shift toward the industrial sector is a major factor in Oklak’s cautiously upbeat projections for 2012. “We do think this will be another solid year (for) bulk industrial,” he said. Occupancy for the portfolio overall rose 160 basis points to end 2011 at 90.7 percent, and Oklak anticipates the slow improvement to continue. Flat growth in the suburban office portfolio was offset by an uptick in bulk industrial facilities, which increased 140 basis points to end the year at 90.5 percent.

Duke’s leadership launched its latest makeover in the fall of 2009. At the time, the company’s portfolio consisted of 55 percent office, 36 percent industrial, 5 percent medical office and 4 percent retail. But the recession prompted a re-examination. Hammered by the struggling job market, portfolio-wide occupancy in Duke’s office holdings slid from its pre-recession peak of 92.5 percent at the end of 2006 to 85.3 percent by the end of last year.

“One of the things we’ve always done is look forward and ask, ‘Five or 10 years down the road, where do we want to be from a portfolio perspective?’ ” Oklak observed. The company leadership decided to increase its industrial holdings, exit the more volatile of its suburban office markets and expand its presence in medical office assets. With that in mind, in 2009, Duke announced its plan to transform its portfolio to 60 percent industrial, 25 percent office and 15 percent medical office by 2013.

Oklak is the first to acknowledge that the company is tackling a formidable task. “It’s not that easy to change an $8 billion or $9 billion portfolio—kind of like turning the iceberg,” he said. That notwithstanding, Oklak continues to push the iceberg at a steady pace. The portfolio sale to Blackstone capped a year during which Duke sold assets valued at $1.7 billion and acquired another $747 million in properties. As a result of that vigorous execution, the target is in sight ahead of the deadline. By the end of 2011, the portfolio consisted of 54 percent industrial, 33 percent suburban office, 9 percent medical office and 4 percent retail.

Besides the Blackstone deal, highlights of the portfolio makeover include the $298 million acquisition of Dugan Realty L.L.C.’s share of a jointly held industrial portfolio. Completed on July 1, 2010, that transaction gave Duke sole control of 106 properties and 20.8 million square feet of industrial space in the Midwest and Southeast, plus 62.6 acres of undeveloped land.

In the first quarter of 2011, Duke made further inroads into the South Florida market with the $450 million pickup of a 4.9 million-square-foot industrial portfolio from Premier Commercial Realty. That deal brought Duke’s holdings in high-growth Broward and Palm Beach counties to more than 7 million square feet. “These are transactions that are transformative for the company, but are not available—or not within the skill set—for other companies to execute,” said Paul Adornato, a senior research analyst specializing in REITs at BMO Capital Markets Corp.

Though the healthcare sector represented only 9 percent of Duke’s total holdings by the end of last year, the aging of the population gives the specialty potential for solid growth and reliable returns. Duke is focusing its healthcare investment and development activities on properties co-located with major medical centers. The built-in association with hospitals boosts leasing, Oklak contends. In January, the company announced medical office acquisitions in San Antonio, the Austin suburb of Cedar Park and the Chicago suburb of Burr Ridge.

The sector is also a favored category in Duke’s growing development pipeline, which Oklak estimates will reach in the neighborhood of $250 million to $350 million this year. Late last year, the company kicked off construction of a 270,000-square-foot building at the $754 million Eskenazi Health campus in Downtown Indianapolis. Formally known as the Fifth Third Faculty Office Building, the facility will be jointly owned by Duke and the Health and Hospital Corporation of Marion County. That project follows Duke’s completion last March of the $154 million Baylor Charles A. Sammons Cancer Center on the Baylor University Medical Center campus in Dallas. In November, the 459,717-square-foot facility earned LEED Gold certification.

Duke’s accelerated activity in healthcare is an outgrowth of a strategy Oklak has been pursuing for years. An early milestone was the 2007 acquisition of Bremner Healthcare Realestate and its nine-property, 784,000-square-foot portfolio. James Bremner, who founded the firm in 1996, remains on board as president of Duke’s healthcare business.

New Realities

Oklak’s steady leadership through the recession provided the foundation for Duke’s current strategy. “I’ve worked with a lot of CEOs as an investment banker, and Denny, in the most challenging times, keeps an even keel, and his demeanor remains fixed and even and positive and constructive,” commented John Case, executive vice president & chief investment officer of Escondido, Calif.-based Realty Income Corp. As a longtime Merrill Lynch investment banker, Case worked closely with Oklak for more than a decade while advising Duke on numerous major transactions, starting with the firm’s IPO.

During the latest recession, Oklak adjusted to the new realities by altering Duke’s business model. Encouraged by changes in the Tax Code, the firm had launched a merchant building business that peaked from about 2002 to 2007. When the recession virtually shut off the development pipeline, Duke exited the business. Though its pipeline is picking up again, Oklak does not foresee a return to that business anytime soon. Instead, the company will build properties for its own portfolio or in joint venture. The shutdown of the company’s building business largely accounted for reductions that trimmed Duke’s workforce by about 19 percent in 2008. In addition, salary freezes were imposed on the company’s 64 top employees, and it closed its fledgling offices in San Antonio, Seattle and Newport Beach, Calif. The board of directors added $150 million in liquidity by imposing the first year-over-year reduction in the company’s dividend since Duke’s IPO in 1993.

In addition to ordering these cost-saving measures, Oklak took steps to raise fresh capital. All told, Duke raised $2.5 billion between Oct. 1, 2007, and April 30, 2009. Adornato credits Oklak with being among the first REIT leaders to turn to Wall Street during the recession. Duke’s planned stock offering drew a skeptical response from some analysts at the time because REIT share prices had tumbled by early 2009.

Nevertheless, Oklak’s decision paid off. In April 2009, Duke raised $575 million on the sale of 75.2 million shares of common stock. “It was the right decision because it assured the market and Duke’s investors that it had sufficient capital” to complete its development pipeline, Adornato said. That summer, Duke raised another $500 million through the sale of unsecured bonds and $114 million in secured financing, and repurchased unsecured debt obligations valued at $352 million.

Duke’s approach to the capital markets during the recession showcased the acumen that Oklak has demonstrated throughout his long run there. “He knows the numbers as well as anyone,” said Adornato, citing Oklak’s ability to quickly size up the significance of complex financial statements. Oklak’s dexterity with a balance sheet dates to his early immersion in tax and accounting issues. A native Hoosier, Oklak graduated magna cum laude in accounting from Ball State University. In 1977, he joined Haskins & Sells, the venerable consulting company that was a predecessor firm of Deloitte Haskins & Sells and Deloitte & Touche. He spent nine years providing tax and accounting advisory service to a clientele that included a number of commercial real estate firms.

The Tax Reform Act of 1986 proved to be a game-changer for the REIT industry. Among its provisions were new limits on the allowable tax losses for passive investors in real estate, a step that essentially ended the use of real estate investments as tax shelters. For Duke and other private companies, the changes added new complexities. In its pre-REIT days, Duke’s holdings were controlled by individuals through multiple partnerships. The Tax Reform Act suddenly made it far more challenging to track income and losses and to determine whether certain items should be considered passive or non-passive.

Under the circumstances, Duke needed a seasoned tax specialist who was also familiar with the real estate business. In 1986, Oklak came on board as the company’s first tax manager. By 1993, he had been promoted to vice president & treasurer, helping to orchestrate the company’s IPO. He saw to it that Duke was among the first REITs to provide quarterly supplemental information beyond Securities and Exchange Commission requirements. “Duke most definitely took the lead when the REIT industry was in its infancy,” Adornato said.

Oklak served as executive vice president & chief administrative officer from 1997 to 2002. In that role, he oversaw tax, accounting, information technology, human resources and tenant services. During that period, he was an integral player in another watershed event. Tom Hefner, Duke’s then-CEO, assigned him to the fi ve-member team representing the company in negotiations for its merger with Weeks Corp. Completed in 1999, the deal expanded Duke’s footprint into eight Southeastern markets, added 31 million square feet of industrial product to its portfolio and grew the company’s value from $3.7 billion to $5.2 billion.

The high-stakes negotiations that preceded the Weeks merger highlighted Oklak’s ability to deliver the goods under pressure. “Those situations can be pretty (intense),” said Case, who had an inside view of the talks as a Duke advisor. “Denny ran point on a number of those conversations and negotiations. He had the ability to react quite well to anything that was thrown at him. Denny was always able to maintain control, keep everything going in a positive and constructive direction.”

At the turn of the decade, Duke set in motion its first succession plan as a REIT. In preparation for Hefner’s retirement, Oklak took the post of COO in April 2002 and moved up to president in January 2003. In April 2004, he officially succeeded Hefner as CEO, and stepped into the chairman’s role a year later when Hefner made his planned departure.

From the start of his tenure, Oklak was working to fine-tune Duke’s portfolio. In 2006, he oversaw the acquisition of a 2.9 million-square-foot portfolio of suburban office and light-industrial buildings from the Mark Winkler Co. That $855 million deal gave Duke a significant presence in Northern Virginia. Later that year, Duke contributed most of the Northern Virginia properties to a joint venture formed with affiliates of Eaton Vance Corp.

During Oklak’s eight years in the hot seat, he has earned a reputation as a CEO’s CEO among his peers and colleagues, not least among them the high-powered members of the Realestate Roundtable, where Oklak is an active member. “He is personable and fair, but he is also very direct and straightforward with people,” said Metcalfe. “I’ve been blessed to deal with a lot of really talented and good CEOs. I’d put Denny at the top in terms of ‘his word is his bond.’ ”

Oklak is a throwback in other respects, as well. In the past generation, it has become increasingly rare for an executive in any industry to dedicate decades to a single company. As Duke marks its 40th anniversary this year, Oklak himself is coming off a milestone he attained last year: 25 years in the real estate business, all spent with Duke. The passage of time has transformed both the company and the industry, and Oklak has done much to help Duke attain many of its significant milestones. Somehow, it seems fitting that an executive who exemplifies constancy is nimble enough to lead his company in a time of rapid change.

When Hugh Frater arrived at Berkadia Commercial Mortgage L.L.C. in August 2010, he had his work cut out for him. Despite the Horsham, Pa.-based company’s stature among the nation’s top loan servicing companies, the veteran finance executive found the firm to be troubled in ways that never showed up on its balance sheet. The greatest challenges he found were intangible. “Berkadia and its predecessors had had a pretty rough ride,” he explained last month in the company’s New York City office, where he works several days a week.

During the previous four years, Berkadia’s people had endured a punishing recession, two transitions to new ownership and multiple management changes. Berkadia had been formed in December 2009 by a joint venture of Berkshire Hathaway and Leucadia National Corp., which had purchased the North American loan servicing business of Capmark Financial Group Inc., the one-time GMAC Commercial Mortgage Corp.

That sale was the endgame of Capmark’s inability to bounce back from the economic downturn. “A lot of the effort of the last two years has been to strip away that baggage,” Frater explained, and to restore vital qualities that had fallen to a low ebb: “the sense of excitement, the sense of mission and the sense of fun at work.”

Known for his upbeat, approachable manner as well as for his 25 years in finance, Frater immediately went to work restoring the morale of shell-shocked team members. He traveled widely to Berkadia’s offices, listened to the concerns of management and rank-and-file, and enlisted his lieutenants to help spread his message of optimism and renewed commitment to best practices.

Frater’s knack for understanding the human side of any equation has contributed as much to his reputation as has his capital markets know-how. “I think Hugh combines a great deal of technical knowledge and understanding of how underlying markets and securities work with a great sense of people,” said J. Richard Kushel, senior managing director & head of BlackRock Inc.’s portfolio group, who worked with Frater at the firm from 1991 to 2004. “You talk to his clients, and they are incredibly loyal to him because he talks to them and understands them. I think that’s true of the people who work for him.”

Fast forward to 2012. During his relatively brief time at the helm, Frater has inaugurated a proprietary lending business, expanded the company’s own stable of lenders and retooled the executive team. Meanwhile, the company has firmed up its position among the nation’s most active mortgage banking firms. Last August, the Mortgage Bankers Association ranked Berkadia among the industry leaders in a wide range of primary and master servicing categories: third in overall loan portfolio ($184.2 billion), third in Fannie Mae and Freddie Mac loans ($27 billion), fifth in special servicing ($28 billion) and in the top 10 in multiple other categories. The company came in at No. 10 on the association’s last originations ranking, with $4.6 billion in volume in 2010; for the CPE-MHN Most Powerful Mortgage Banks ranking, it reported $5 billion for the year ending Sept. 30, 2011. (It placed 18th on the CPE-MHN ranking, which evaluates innovation and breadth in lending rather than strictly volume.)

Berkadia’s two-year-old ownership by the Berkshire Hathaway-Leucadia joint venture is predictably proving to be a competitive advantage. Being identified as part of the empire led by Warren Buffett confers credibility with the government-sponsored enterprises, investors and clients. As Frater puts it, “No one asks if we’ve got the money.” Such indicators speak for themselves, yet an equally important achievement is impossible to measure. “If you asked the people (working at Berkadia) a year ago how do they feel and asked them today, it’s probably night and day,” Frater said.

Having guided the company’s internal turnaround, Frater is sifting carefully through often contradictory signals as he maps out Berkadia’s future. On the plus side, he said, the payoff rate for maturing loans in the company portfolio improved dramatically year-over-year in 2011. He cites Berkadia’s Boston portfolio. Only about 30 percent of loans that came due in 2010 were paid off, but that number hit 75 percent in 2011. That is encouraging news, to be sure, yet Frater remains skeptical that happy days are here again. Keeping an eye on week-to-week changes in loan payoff rates reveals volatility and suggests a more nuanced view.

Frater also regards the refinancing issue with deep concern, noting the “very, very substantial gap between the amount of capital needed and the amount available.” Even the most optimistic projections for new CMBS securitizations in 2012 fall far short of generating the proceeds necessary to refinance loans maturing this year. Commercial banks, life insurers and other lenders may be willing to increase their allocations to some extent, but they will be hard-pressed to bridge the gap left by the shortfall in CMBS financing. The problem will only grow as 10-year loans made during the market’s peak begin to mature in large numbers around 2015. Frater has managed through numerous cycles and is hardly an alarmist, yet he states, “I think we have a potential disaster on our hands.”

Disquieting as that prospect is, Frater also maintains that it presents an opportunity for Berkadia to step up. “Uncertainty is generally good for us,” he said. “It means that our fundamental constituencies—our borrower clients and our investor clients—need us more.” Frater’s charge is to ensure that Berkadia can continue to fulfill that long-time role. The company’s roots stretch back to 1994, when it was founded as GMAC Commercial Mortgage Corp. In March 2006, the company was acquired for $1.5 billion by a joint venture of Kohlberg Kravis Roberts & Co., Five Mile Partners L.L.C. and Goldman Sachs Capital Partners. The new ownership re-branded the company as Capmark Financial Group Inc. and brought in a new executive team.

But like so many other real estate finance players, Capmark ran aground during the recession. During the third quarter of 2009 alone, the company posted a loss of $1.6 billion. Capmark began talking with potential suitors, and on Sept. 2 of that year, it revealed an agreement to sell its North American loan business to the Berkshire Hathaway/Leucadia joint venture, whose $515 million offer edged out a bid from PNC Financial Services Group Inc. The transaction closed in early December 2009. In between those two milestones, on Oct. 25, Capmark filed for bankruptcy protection, emerging two years later, on Sept. 30, 2011.

Multi-Family Focus

As Frater views the commercial real estate landscape, he sees the multi-family area as a standout among the property sectors Berkadia serves. “What I’m taking confi dence in is that 17 million apartment units in the U.S. are not going away,” he said. “We don’t need less of them. If anything, we need more of them.” Demand outpaces supply in most markets, a trend which Frater argued cannot be consistently said of other property types.

The company’s sweet spot is the middle-market loan valued at between $5 million and $25 million. In January, for example, it originated a $13 million HUD/FHA refinancing for Stone Oak Care Center, a nursing home in San Antonio. That transaction replaced a bridge loan that had been placed by Capmark.

As generally robust as the multi-family market appears to be these days, Frater is mindful that the sector has its share of uncertainty, too. In the long run, the biggest moving parts surround the two government-sponsored enterprises. Speculation varies widely as to what a new Fannie Mae and Freddie Mac would look like, but downsizing or phasing out the two troubled giants could drastically alter the multi-family finance landscape.

“If the agencies are not going to continue to be a significant supplier of capital, there’s a lot more risk than people think,” Frater contends. For starters, the resulting scarcity of capital would hike borrowing costs significantly. A decision on the future of the GSEs may not emerge for several years, but in the meantime, Frater’s strategy is intended to stand Berkadia in good stead no matter what Congress decides.

One new avenue is the debut of its proprietary lending business, which the company formally unveiled last March. Drawing on capital generated by Berkadia itself, the program is intended to fi ll a niche: the demand for financing by borrowers who find it difficult to secure other sources of capital. The new platform specializes in floating-rate bridge lending for borrowers seeking to reposition properties through non-recourse commercial debt. Frater explained that the liquidity of the permanent loan market for multi-family makes it the best fit for the new platform. Other property categories still tend to be considerably more susceptible to fluctuating consumer demand and changing labor markets. For that reason, he explained, Berkadia’s loan origination is “very, very selective once you get away from multi-family as an asset class.”

The program’s origination volume exceeded $300 million in 2011 and is projected to grow by at least 10 to 15 percent in 2012. Sample transactions closed during its fi rst year included a nearly complete project in Brooklyn, N.Y., that will encompass 113 rental units plus 6,000 square feet of retail. Berkadia’s New York City office refinanced the construction loan through a $28 million floating-rate transaction.

A proprietary lending program brings not only increased potential for growth but also increased exposure. To meet the need for a robust risk-management strategy, Frater brought in Morgan Stanley alumnus Luther Peacock in April 2011 to serve as chief risk officer, a new post. That appointment was one of several additions to Berkadia’s senior leadership. Randy Jenson, the firm’s president & CFO, joined in July from Ranch Holdings L.L.C., an investment management company he had co-founded.

Further expanding Berkadia’s access to capital has been another priority. Starting in late 2010, the company began a concerted effort to broaden its contacts in the life insurance business. All told, Berkadia projects life company originations valued at $1 billion in 2012. It has brought in additional mortgage bankers and support staff, which has enabled the firm to increase its network of life-company capital sources to about 25. Last September, Berkadia added a $2 billion servicing portfolio of life-company loans when it acquired Jacksonville, Fla.- based Tavernier Capital Partners L.L.C. Most recently, in December, Berkadia opened an office in Tempe, Ariz., that will focus on tapping into life companies.

Berkadia is also eyeing multiple regions for potential expansion across a variety of business lines: Atlanta and other Southeastern markets; Southern California; San Francisco; Phoenix; Portland; Seattle; and select markets in the nation’s North Central area.

At least one avenue to Berkadia’s growth has been less than welcoming, though. Turmoil in the real estate capital markets has caused contraction, and as a well-capitalized player, Berkadia has the resources to pull off strategic acquisitions. But fewer opportunities have arisen than Frater expected. “We’ve had a lot of conversations (with potential merger partners),” he reported, “but those talks have almost always been frustrating or inconclusive.” A rare exception, the Tavernier Capital acquisition last September was bolstered by a natural chemistry: Tavernier’s founders were alumni of Berkadia’s legacy firms, Capmark and GMAC, who had departed in 2007 over differences with Capmark’s leadership at the time.

While working to instill a renewed sense of confidence and mission, Frater has also promoted practices aimed at analyzing the company’s operations more effectively. “Another big change is … we’re measuring more and more things,” he said. As an example, he cited a new effort to track underwriting times. Monitoring how long it takes to reach each milestone in the process, from the initial application to the quote to the loan closing, allows for more accurate assessment of productivity and processes.

Learning the Ropes

On the way to his current position at Berkadia, Frater took a path that encompassed stops in media, investment banking and renewable energy, as well as the real estate capital markets. As Kushel, his former colleague at BlackRock, explained, “He hasn’t been afraid to reinvent himself.” Soon after graduating from Dartmouth College with a degree in English, he spent three years as programming director for The Learning Channel. In 1983, he entered Columbia Business School, where he explored his interest in fi nance.

Frater received an initial taste of investment banking between his fi rst and second years in graduate school, working for Goldman, Sachs & Co. as a summer associate in equity sales and trading. After receiving his M.B.A. in 1985, he was recruited to Lehman Brothers Inc. by Ralph Schlosstein. He spent the next three years in Lehman’s institutions and merger department, working on equity and debt financings and strategic transactions for mortgage lenders, homebuilders, savings institutions and banks.

“He was a very talented, hard-working professional who, despite the fact that he was extremely talented, didn’t let it go to his head,” Schlosstein recalled. In 1988, Schlosstein invited Frater to be a charter partner in a new enterprise: an investment management company dubbed Black- Rock Inc. During the next 15 years, Frater wore a variety of hats as Black- Rock grew into the world’s biggest investment manager.

Co-head of institutional client service and business development and a member of the management committee, he started a team that specialized in high-yield securities, mezzanine loans and preferred equity backed by commercial real estate, and launched Anthracite Capital Inc., a specialty finance company, as well as the Carbon Capital group of funds, which provide mezzanine lending through a series of private institutional commingled funds.

In February 2004, Frater moved to PNC Financial Services Inc., where he led the real estate fi nance division and served as CEO of Midland Loan Services, the bank’s commercial loan servicing unit. He managed a $200 billion loan servicing portfolio, $11 billion in debt commitments and $13 billion in lending volume annually. On Frater’s watch, lending volume, revenue and profi ts all rose upwards of 70 percent. He recalls it as “a fascinating experience because it was my fi rst large corporate experience.”

After 19 years in finance, much of it dedicated to commercial real estate, Frater branched out. In November 2007, he joined Good Energies Inc., an international, privately held investment management company focused on renewable energy. Taking on multiple roles as COO, managing director & senior advisor, Frater oversaw portfolio and risk management and served on the investment committee.

Among other accomplishments, he generated improvements in investment and portfolio reporting processes, trimmed operating expenses and led an initiative to rationalize the organizational structure. Fallout from the capital markets crisis caught up with the company, however, and in June 2010 Frater departed as part of a restructuring. The break turned out to be brief. As Frater was mulling his next move, Berkadia approached him, and by August he had signed on as CEO.

Regarding Frater’s personal demeanor, Schlosstein commented, “There are very few people that Hugh has encountered in his career and in his personal life that don’t enjoy being with him.” An executive with a reputation for congeniality, Frater strives to convey the message that he is approachable, no matter what the issue. Whether the setting is a committee meeting or an office-wide town hall, Frater says, the lines of communication are always open; he is game to address whatever concerns may come up. “I will not be offended,” he insisted, adding that “there is no such thing as a dumb question” is a favorite piece of advice.

For his part, Frater believes that congeniality is compatible with another quality he prizes: the judgment and confidence to disagree with the boss. Indeed, Frater says the highest praise he can bestow in a performance review is that the person is unafraid to challenge the boss’s thinking.

When Frater joined Berkadia, he followed a practice that has become habit at his last few jobs, pursuing an exercise suggested by Leon Kendall, former chairman of Mortgage Guaranty Insurance Corp. For the first 90 days on the new job, Kendall advised, “write down everything that comes into your head.”

The 90-day threshold is crucial because that is roughly how long it takes for a newcomer to become part of the team. So Frater opens up a new spiral-bound notebook and fills it with his ideas about the company and impressions of his new colleagues. “An important part of anything I’ve done is determining who’s truthful, who’s got integrity, who’s got energy,” he said.

During the initial stretch on any new job, an executive is absorbing a vast download of data. Frater is well aware that it can take even a seasoned executive some time to tell when somebody is trying to sell a bill of goods. Yet for Frater, the spiral notebook has also confi rmed the value of trusting first impressions. “What you write down in the first few weeks after you’ve been spending 15 hours a day talking to people is always right.”

Judging by Frater’s accomplishments so far at Berkadia, those instincts are giving him a high batting average.

Gary Brennen (left) and Cyrus Izzo, co-presidents of Syska Hennessy Group.

CPE: What do you consider to have been the greatest improvements in real estate design in the past 10 years?

Brennen: What we’ve seen really being pressed by our clients—developers, landlords, government agencies—is this idea of high-performance—or green—design. We like the term “high performance” better, because it paints the picture about how design matters in how buildings take their shape and how they operate. That’s true for the landlord as well as the occupants. How do you create these high-performance environments—pretty creative spaces—that have positive energy but reduce their energy and carbon footprint at the same time?

Izzo: To Gary’s point, in order to bring these concepts to life, some of the tools that are available to the design community are really cutting edge. If you look back 10 years, or even five years, to the current day, tools like building information modeling, energy simulation tools and really being able to put forth a model that owners, developers, contractors and designers can all weigh in on and change before anybody really gets out into the field and puts a shovel in the ground has been amazing.

CPE: Tell me more about how you approach new construction today and what’s different about your approach from what it used to be.

Brennen: One of those (differences) now in the approach is how collaborative we have to be. The way to make that impactful is the use of the tools Cyrus just talked about. How do we bring forth our ideas in ways — through 3D modeling or the parametrics we use, in real time — that help our clients make predictive decisions early during — we call it the opportunity phase. When you’re visioning your project, how do you create the ideas that people understand and then predict the outcomes by using BIM and energy modeling tools, daylighting strategies and tools, so that you make the right decisions at the front end of a job that create these dynamic spaces people really need in the marketplace, to either market to tenants or market to their user groups or market, in some cases, to the neighborhoods? … It’s a way of creating an approach that helps the entitlement process by having low-energy, low-water, low-carbon- type facilities that show maybe it’s actually a positive to have construction.

Izzo: I think the other real game-changer in the industry is … collaboration with the owner, the design team and the contractors, as well as the folks who will operate the facility. In lieu of them being in various corners, kind of staking their claim and watching just their areas of interest, it really is, from the beginning of a project, a team approach to developing a truly successful outcome for the owner, so that all of these different stakeholders work together, hand-in-hand, from the project commencement right through to commissioning, completion and occupancy.

And then there’s some feedback that might occur just to see how these systems and the building are performing, and the KPIs against that. If they’re set up-front, it’s great to have an owner who’s willing to measure those KPIs as the building continues to evolve.

As engineer of record, Syska Hennessy collaborated with IBE Engineers to make the Cooper Union Academic and Science Lab Building in New York City technologically advanced, sustainable and flexibly designed. Photo by Iwan Baan Photography.

CPE: Is there anything in your experience that you think developers are just not focusing enough on now or could be addressing better?

Brennen: One of the challenges we see with developers and owners is that they need to be engaged early on in the decision-making and design process, in terms of making key decisions about how the building will operate, not just what it looks like. Sometimes you get trapped with the aesthetic, but performance matters in these high-performance, sustainable buildings. And (you can’t just say), “Let’s have the engineer create a high-efficiency mechanical system.” That’s not going to be good enough anymore; you’ve got to have a high-efficiency building design (from) the beginning.

I think owners have to learn and be engaged up front in that dialogue. How is the building massed? How is it oriented? What’s the glass and daylight condition? How do I keep solar gain out but good daylight in? It’s almost, “How do you engineer the architecture,” which drives the architect nuts a little bit, but you’ve got to tune the design from day one, and then … continue to tune the building after you occupy it to get the kind of results you want—and probably your tenants want, too.

Izzo: I don’t like to generalize, but the one big topic that I think everyone talks about but I don’t know that, as an industry—owners, architects, engineers, contractors—we’ve quite figured out is the future of energy. What does that look like? How does that impact the decisions we’re making today and the buildings that we’re designing and building today? I don’t know that there’s a clear-cut answer just yet. But I don’t believe people are focusing as much as we all should be on what the future of energy will be like in this country five, 10, 20 years from now. It’ll be very different, and we just want to make sure we’re mindful of what might occur, because the decisions we make today may not make sense with the changing landscape of energy.

CPE: Are you incorporating that into your thinking now?

Izzo: We’re addressing it probably as much as anyone else. However, I don’t know that owners have embraced that conversation too readily. Everyone wants to talk about green energy. When people see the current payback scenarios, et cetera, et cetera, that conversation typically ends pretty quickly. As an industry, we probably want to make better decisions. And … probably some more R&D is required of what decisions we should be making today, since energy will continue to be a challenge for the next 20 years.

Brennen: Essentially, all our resources: energy and water. … We certainly see the federal government beginning to push again, with their idea of carbon neutrality by 2030. It’s a very ambitious goal for the federal sector, to be carbon-neutral in their whole portfolio by 2030. I don’t know how you get there from here, but it certainly means you’ve got to start rethinking how you design buildings, as we talked about, with all our modeling tools and rethinking the skin, the massing and the orientation. And you might even have to have renewable energy sources in your building, so that you’re almost energy positive, if you’re really going to get there—whether that’s solar, fuel cells, co-generation or wind.

CPE: How much redevelopment do you need to do in order to incorporate some of this?

Brennen: When you think about your existing buildings, as landlord or developer, you have to reposition them not just for their looks and finishes but how they perform in this new kind of energy environment or regulatory environment we’re all going to be in. How do you improve the performance of the building and its systems, not just its look and feel?

Izzo: That has everything to do with the owner’s bottom line. The performance of those buildings will either make or break how competitive they are in attracting tenants, and also attracting a favorable bottom line. And it all comes down to: What is the return on those dollars that they invest? If those systems are not performing well, they will not be competitive with the building next door, and they will have a tougher time attracting and retaining quality tenants and charging market rents.

CPE: What do you see as the next evolution of commercial buildings?

Izzo: Sticking to the energy topic, sticking to the highly collaborative spaces, sticking to the high-performance solutions so that the employees are productive, the buildings operate well, I think you’ll find that things like IPD, BIM and these tools will continue to be refined so that commercial office buildings in the future remain very efficient, not just to construct but to finance and operate. In the past, there might have been more investment dollars available (for) proper- ties, and people were willing to potentially tolerate lower efficiencies. I think that’ll be off the table in the not-so-distant future.

Brennen: The U.S. practice usually was to overcome the environment that they fit in— so overcome the solar gain, overcome the cold temperature outside. Now buildings’ design needs to engage. You know, architects talk a lot about this: “of its place and of its time.” Well, now the building itself needs to respond to and engage with the sun. What are the opportunities to have daylighting or solar PVs? What’s the opportunity to naturally ventilate transitional spaces, where you may not have to use mechanical cooling. …The building needs to engage the outdoor environment it’s sitting in.

And then the occupants will live in that space, and you’ll have this much brighter, day-lit, comfortable environment for them to be productive in. That’s really an area that still continues to evolve, because we’re so used to just overcoming it by adding in chillers and mechanical systems and all that stuff.

CPE: What are some examples?

Izzo: If you look at people who have really studied their environment and figured out ways of leveraging their environment, whether it’s using river water for cooling or figuring out new and exciting ways of using geothermal systems, although at first glance they may not have had the best short-term ROI, I think people with a longer-term view understand that that will pay dividends—maybe not in three years but over the life of the facility. It’ll be very potent and very measurable for their investors.

Brennen: Longer term, corporate clients are definitely thinking along these lines … talking about building LEED Platinum. … GE (wanted a) LEED Platinum data center, because that was important to them, for their employees but also as a message to the marketplace. We see it in RFPs coming out now for Intuit—LEED Platinum for their new building up in Mountain View. They’re beginning to take a longer-term view about the environment and its impact on their local workforce, but also the community at large and how good a neighbor they need to be.

The government kind of started this process, but now we see it in our corporate clients. You’re going to see it (expand) to the more savvy developers, who have to cater to these kinds of corporate clients. It’s almost a three-step process. The smart developers, Hines or Durst, they get it. They know they’ve got to get out in front of this.

CPE: What do you see as the biggest prob- lems with or drags on building operation today?

Izzo: It’s probably around training. These buildings continue to become quite complicated in how they’re designed, and, most important, how they’re operated. Now, with some of the systems, everything is riding on technology. I think people have to really spend time training their teams to be able to operate these buildings and tune these buildings, because it’s not just set the thermostats once and walk away for the next 30 years. You have to really continue to monitor these measurements that you get back in the system. And then how do you proactively manage those systems to take advantage of some of the data points you get back?

As a building evolves and matures, you need a very robust operations team, who’s highly trained, highly technical; who can take advantage of a building and tune its systems to be able to wring the most efficiency out of all of the systems that are designed and installed. And that’s not really static; that’s a very dynamic process.

CPE: That means a different kind of team.

Brennen: A little more sophisticated, and I think Cyrus’ key word there is “proactive.” Traditionally, the building engineers were probably very good reaction-wise; this is a different mindset. How do you think ahead? How do you learn from what the building’s systems are doing and then continually improve them through (being) proactive, using your BMS systems smartly, understanding … how you can tweak set points. It goes on and on and on. But it’s a different … mindset and culture that these buildings are going to demand over time.

For further discussion of sustainable, or “high-performance,” practices, turn to “Sustainable Solutions.”

At this stage of a career that spans a half century—including 40 years at the helm of the diversified real estate firm that bears his name—Robert Voit is more than entitled to take a victory lap and head to the golf course. Since founding Newport Beach, Calif.-based Voit Real Estate Services’ predecessor firm in 1971, Voit has built a powerhouse that provides tenant and landlord representation, investment management, property management and principal acquisition to select markets in the Western United States.

Today, 45 million square feet of development, acquisitions and property management bear his imprint. Voit Real Estate Services and its predecessors have completed construction projects valued at $1.5 billion and transactions worth $33 billion. Voit has also made his mark as a developer, contributing significantly to the shaping of the nation’s second-largest metropolis through a series of innovative projects. Along the way, Voit’s refreshingly old-school approach to business has earned the trust of elected officials, institutional investors and the public.

“Bob has had great success because he has a great deal of integrity,” explained Brad Rosenheim, a land-use and entitlement consultant who started working with Voit on development projects as a Los Angeles City Council staffer some 25 years ago. “He means what he says, and he fulfills the commitments that he makes. As a result, he has a tremendous reputation for doing good work.”

Rather than calling it a day, however, Voit is relishing the opportunity to recalibrate the firm’s strategy in the face of a market that he calls the most challenging of his long career. Though Voit has lived through numerous market ups and downs during more than four decades in the business, “this is probably the biggest adjustment required in the 50 years I’ve been in commercial real estate,” he said.

For Voit’s team, no less than many other industry players, the years since the fall 2008 financial crisis have demanded soul searching about the company’s direction. The consensus opinion among the senior brain trust was to aggressively expand services in targeted areas such as leasing, financial management and property management. The multi-front strategy that emerged is founded on a single principle: “We wanted to have a platform that will be relevant in the good times and in the bad times,” Voit explained.

In response, Voit has re-focused the company on the service side, working to expand its presence in property management, leasing and investment sales. “I think of us as a real estate operator,” Voit explained. “We want to be able to handle all aspects of commercial real estate for institutional and commercial clients.”

The company has continued to grow in the face of economic volatility. In 2010, Voit rebooted its Phoenix office, which had closed two years earlier in the midst of the capital markets meltdown. The company’s 10th office also made its debut in 2010, when Voit hung out its shingle in Southern California’s powerful Inland Empire. Voit’s nine other offices include locations in Phoenix, Las Vegas and seven more in California.

A centerpiece of the company’s revamped strategy is services related to distressed assets. In 2009, Voit made the pivotal decision to launch an expanded business line dedicated to the discipline. The soundness of that decision has since been confirmed by industry trends. Voit cites studies indicating that sales involving distressed assets in its markets increased from 2 percent of the total in 2008 to 30 percent by 2011. By square footage, distressed properties figured in more than three-quarters of sales in those markets.

Geared toward financial institutions and other lenders, the new practice has enlisted a roster of national and regional heavyweights, like Bank of the West; Iron Point Titan; and LAMCO L.L.C., which manages the legacy real estate assets and other investment interests of Lehman Brothers Holdings Inc. Demand for services has been particularly heavy in Orange County, Sacramento, Phoenix, Las Vegas and San Diego, Voit reported.

The distressed-asset initiative has quickly gathered steam. And during a particularly productive six-week stretch last summer, Voit won assignments to handle 14 distressed properties totaling 944,000 square feet in Orange County, Calif.; San Diego; Phoenix; and Las Vegas. By August 2011, the new practice had completed 11 assignments and was handling more than 125 others. Thanks in large part to Voit’s bet on the demand for distressed services, the company’s bottom line is enjoying a healthy boost. By the fall of 2011, brokerage had improved 22 percent year over year, and revenue had jumped 53 percent.

Going forward, Voit is also eyeing stepped-up activity in the company’s principal investment business, predicting, “We’ll be looking to be more aggressive in acquisitions.” The company is particularly focused on deals in the $5 million to $100 million range and is pursuing core-plus, valueadded and opportunistic buys alike. Rather than going it alone as an investor, Voit intends to continue a career-long practice of joining forces on investments and developments with commercial banks, private investment funds, life insurance companies and other institutional players.

Another growth area is property management, which has grown by about 50 professionals in the past couple of years, Voit said. In a short time, the management business has established a stable of 15 clients. As in other aspects of the company’s activities, its property management work has a geographic focus: It favors California, Arizona, Nevada, New Mexico and Washington. That move raises Voit’s profile in a service line that the company sold to Transwestern a decade and a half ago—a move that hindsight has led Voit to view with some regret.

For Voit, the re-focus and new services bring him full circle. He started in the business on the service side, working his way up from the mailroom at Coldwell Banker to a position as an office leasing broker. But by 1971, Voit was looking for a new challenge. He left Coldwell Banker and launched Voit Corp., a development company that was the ancestor of today’s firm. The company’s first project was an 80,000-square-foot, twophase office project. During the next decade and a half, Voit gradually built the firm into a one-stop shop. He introduced a property management business in 1973 to handle the company’s own assets as well as provide services to third-party clients.

In 1977, Voit and partner John DeWeese founded Valley Commercial Contractors, which has served as the company’s construction unit for the past 35 years. In that time, Valley Commercial has completed projects valued at $1.3 billion. Yet another milestone was the 1987 debut of Voit’s commercial brokerage business, which has completed upwards of $33 billion in lease and investment sales transactions. Remarkably, 14 of the brokers who signed on to launch the transaction unit are still with the firm more than two decades later.

Pioneering Projects

Although Voit has made his mark in multiple real estate specialties, he is probably best known to the general public as an innovative and community-minded developer. “Bob is one of the great visionaries that I know in the real estate industry,” said Rosenheim, the consultant and former Los Angeles City Council staff member. Persistent in the face of daunting odds, the upbeat, engaging Voit is the polar opposite of the “my way or the highway” developer. Colleagues call him an expert listener who seeks input from the community, elected officials and government agencies, then incorporates those concerns into the finished product.

The project that will likely stand as Voit’s signature development, the $500 million Warner Center in Woodland Hills, Calif., began life as the rural retreat of a Hollywood mogul. In 1974, Voit teamed with New England Mutual Life Insurance Co. to develop more than 200 acres of a San Fernando Valley horse ranch formerly owned by Harry Warner, a co-founder of the Warner Brothers entertainment empire. Voit foresaw the area’s potential, and set his sights on what seemed to many at the time like an impractical idea: transforming the Warner property into a mixed-use development and business hub for the seemingly remote western San Fernando Valley.

Over the next decade and a half, the project unfolded in two major components. The low-rise portion, Warner Center Business Park, is a 944,000-square-foot development. Voit complemented that with the 2 million-square-foot Warner Center Plaza, which includes five high-rise office towers. During the past three decades, Voit’s once improbable project has proven to be transformative. Today, Warner Center stakes a claim to being the leading business district in the sprawling, 250-square-mile San Fernando Valley.

Voit’s approach to the development was ahead of its time in other ways. “With his leadership, Warner Center created a very active transportation management association,” explained Rosenheim. Warner Center is considered a model for mass transit in a region that battles traffic congestion and smog, offering a major bus hub and a light-rail station. Those elements give it one of the best occupant-to-vehicle ratios in Los Angeles, Rosenheim pointed out. Voit also set Warner Center apart from the competition by incorporating amenities like day-care facilities, restaurants, service retail and a hotel.

After 20 years of developing and owning the property, Voit began exiting its interests during the mid-1990s. A joint venture of the Alaska Permanent Fund Corp., the state’s public investment management fund, and the Harvard University endowment fund bought a 2.3 millionsquare-foot portion of Warner Center for an undisclosed price in 1995. The following year, CarrAmerica Realty Corp. paid more than $50 million for a 12-building, 343,468-square-foot portion of the low-rise Warner Center Business Park complex. That deal marked the conclusion of Voit’s ownership stake in Warner Center, although the company continued to provide property management services for some time afterward.

The credibility conferred by Warner Center’s success continued to yield dividends long after Voit’s exit from the property. His reputation for business acumen led to a pivotal role in a unique public-private partnership. The project grew out of a proposal in the 1990s by the late Los Angeles City Councilman Marvin Braude. He wanted to build a one-stop shop of city services for constituents in his San Fernando Valley district. The proposal fell short at first but resurfaced a decade ago after Braude’s retirement.

Negotiations with city staff yielded a complex agreement for construction of a 142,000-square-foot facility. The contract provisions featured innovations that have yet to be replicated on a Los Angeles city project. Under standard city procurement rules, planners begin by selecting an architectural consultant, which submits a design to city agencies. Once approved, that design is posted for bids by construction contractors.

Instead, Voit was selected for single-point responsibility, not only building the project but choosing and supervising the architectural team’s work. Voit was allowed to lease the cityowned parcel for 30 years, then deliver the project on a turnkey basis. Former Los Angeles City Councilmember Cindy Miscikowski, a former Braude aide and his successor, cites Voit’s “stellar delivery of product and his reputation” as factors that gave city officials confidence in the firm’s ability to deliver the project on time and on budget. Voit took pains to solicit community input and incorporate it into the project.

In June 2003, Voit completed the Marvin Braude San Fernando Valley Constituent Services Center $2 million under budget and five months ahead of schedule. Upon the project’s completion, the city exercised its option to buy the facility outright. “No hurdle was too big to overcome,” Miscikowski added. “Many another developer would have walked away or said, ‘Sorry, it isn’t worth the brain damage.’ I can’t think of another developer who would have stayed with it.”

She also suggests that the project played a role in easing tensions that once threatened to pull Los Angeles apart at the seams. By the mid1990s, a sense of alienation from the rest of Los Angeles sparked a secession movement aimed at establishing the San Fernando Valley as a separate city. Miscikowski speculates that development of the high-profile Braude Center sent a much-needed message to Valley residents that they are a valued part of the city. By the time the project was delivered in 2003, she noted, discussion of secession had begun to die down.

Voit’s development projects have contributed to community-building in other respects, as well. One such endeavor started with the 1993 departure of General Motors Corp. from its longtime manufacturing facility in Van Nuys, a community in the southern San Fernando Valley. Los Angeles City Council member Richard Alarcon, who represented the area, sought to redevelop the property in a way that would shore up the community’s sagging economic fortunes. He negotiated a deal with General Motors that would re-zone the property as approximately one-third retail and one-third industrial. For its part, GM retained slightly less than one-third of the property for a testing facility, and five acres were set aside for police and fire stations.

To develop its 66-acre section of the site, Voit planned a $75 million mixed-use project on adjacent parcels. The firm took the lead on the 800,000-square-foot industrial portion, and teamed with Selleck Development Group on building 370,000 square feet of retail dubbed Van Nuys Center at the Plant.

In completing such difficult and complex projects, Voit has demonstrated a rare combination of qualities. Though a master at bringing an extraordinary vision to life, he also approaches his work with remarkable grace and style. When it comes to development projects, Miscikowski said, that means “integrating the elements of the community into the elements of the building.” For a lifelong builder like Bob Voit, there might be no finer legacy.

American Realty Capital continues to incorporate the magic produced by top executives at the former Grubb & Ellis Capital Corp. into its broker dealer subsidiary, Realty Capital Securities, with the hiring of Richard Arnitz. The former CEO of Grubb & Ellis Capital and Grubb & Ellis Securities and a visible player in the financial services business for nearly a quarter-century, Arnitz is now RCA’s executive director.

“Rich is a great industry leader,” Nicholas Schorsch, chairman and CEO of ARC, told Commercial Property Executive. “He was president of Cole Capital Markets, he worked at AIG in their distribution business and he worked at Grubb & Ellis as the CEO of its distribution business, so he understands distribution in a very unique way.”

In his new role, Arnitz is tasked with managing the strategic sales initiatives for RCA-sponsored offerings American Realty Capital Healthcare Trust and American Realty Capital Retail Centers of America. He brings to the table a history that blends both the healthcare and retail sectors of commercial real estate. “He has great experience in the healthcare space,” Schorsch said. “Between our company and Grubb & Ellis Corp., his former company that is now closed, we raised almost all the capital in the healthcare non-traded REIT space. Combining those teams brings that intellectual capital together in our organization, and it just makes our company better. ”

Ditto for the retail sector. At Cole Capital, Arnitz was heavily involved in distributing Cole Credit Property Trust, Cole Capital’s ’s non-traded REIT focused on high-quality retail properties net leased to creditworthy tenants across the U.S.

But it’s not just Arnitz’s experience in healthcare and retail that registered high on ARC’s radar, it’s his mindset. “Richard has a keen interest in the shareholder,” Schorsch explains. “He focuses on how a product works for the shareholder and that is our fundamental mantra for our business, the shareholder-first philosophy. Rich shares that and that is a key, core cultural fit for him and our organization. With a high-level hire like Rich, it makes a lot of difference that we share the culture.”

For Arnitz, it will be like old home week at ARC, but for the long term. He is now colleagues once again with a hoard of former senior Grubb & Ellis Capital players, including Lavea Thomas and Diana Keary, who have taken on the respective positions of director of national accounts and chief marketing officer for RCS. And the list goes on and on. “Basically, now all the senior people are with us.”

William Polk Carey, founder and chairman of multi-billion-dollar investment management company W. P. Carey & Co., died of natural causes in West Palm Beach, Fla., on Monday, Jan. 2. Carey, a trailblazer in the sale-leaseback arena, was 81 years old.

Read Commercial Property Executive’s original story on Carey here.

“William Polk Carey was a pioneer in sale-leasebacks,” Sidney Domb, president and CEO of United Trust Fund, a leader in the sale and leaseback of corporate real estate, told CPE. “I started in 1972 and there was a W. P. Carey then. He had vision and foresight to explore and go into Europe with sale-leasebacks when no one else chose to enter. He was fearless in his decisions and he will be missed.”

“As an institutional-quality buyer, they’ve been a very reliable, very well-capitalized, very well-managed firm that’s been a significant player in that niche for many, many years,” Jeff Hughes, senior director in investment sales with leading net lease firm Stan Johnson Co., said, speaking to CPE about the firm Carey founded.

With Carey as a driving force, sale-leasebacks became somewhat of a game-changer.

“He started in the industry 40-plus years ago, and prior to that time, corporate America did not have a very good outlet to take real estate assets off their balance sheet and monetize them in the form of a sale-leaseback transaction,” Hughes noted. “So it’s been a very significant financing mechanism that has allowed corporate America to do just that. If you’re in the business of building widgets then arguably you shouldn’t also be in the business of owning your manufacturing facility or your warehousing facility or your retail outlets. Carey pioneered the concept of taking that real estate off the balance sheet — you don’t need to own it, just sell it and lease it back on a long-term basis. It frees up your capital to plow it back into whatever industry you’re in, it allows you to do 100 percent financing of that asset and it still allows you long-term effective control of the asset through that long-term lease.”

Carey applied the sale-leaseback concept to veritably every sector of commercial real estate around the world. Past transactions include the $58.1 million acquisition of a 473,000-square-foot portfolio of boat fabrication and servicing facilities from a premier U.S. yacht builder, and the simultaneous closing of a 25-year lease agreement with the seller. The firm’s deals in the retail sector include the $154 million purchase of a 1.3 million-square-foot portfolio of retail facilities in Germany from do-it-yourself retailer Hellweg Die Profi-Baumärkte GmbH & Co. KG, which subsequently signed a 25-year lease with W. P. Carey for the space.

“Bill Carey was a pioneer in that industry, pioneering a concept that later became very mainstream in the capital-markets world,” Hughes said. “Many other institutions followed that path and mirrored that strategy, but he was a pioneer in making it commonplace and doing it on a very large and very professional scale for many years.”

Pioneer. It is the word that flows from the mouth of many in the commercial real estate business when ruminating about Carey. “Bill was a pioneer in the net-lease industry and those of us who now work exclusively in this niche owe tribute to his early work,” Bruce S. MacDonald, president of Net Lease Capital Advisors, shared with CPE. “He was a generous individual who gave back to the education and business communities he was a part of.  He leaves the legacy of having contributed to the growth of an industry and of having built a respected firm.

Since his passing, W. P. Carey’s board of directors unanimously elected Benjamin H. Griswold IV, a director with the firm since 2006, as non-executive chairman of the board. “A significant component of Bill’s legacy is the balanced strength of this organization and the quality of our people at all levels, which is consistent with the gold standard he set for himself and others,” Griswold said of the late Carey. “The depth and breadth of the talent within the firm and their dedication to its core beliefs position us well to continue our success and maintain the tradition of excellence that has been emblematic of W. P. Carey throughout its history.”

When Wm. Polk Carey passed away yesterday, he left behind a legacy. The 81-year-old founder & chairman of multibillion-dollar investment management company W. P. Carey & Co. was a trailblazer in the sale-leaseback arena.

A direct descendant of President James K. Polk, Carey, who passed away of natural causes in West Palm Beach, Fla., had leadership in his blood. Armed with a background as a leader in corporate finance, he founded W. P. Carey in 1973 and became one of the founding fathers of the sale-leaseback strategy, molding the company into a top force in long-term sale-leaseback and build-to-suit financing in the commercial real estate industry. The company now boasts a global investment portfolio valued at roughly $11.8 billion.

Among notable transactions, under Carey’s guidance, the company closed a $225 million mega-deal in which it acquired 21 floors of the New York Times Building in Manhattan while simultaneously signing a deal with the newspaper to remain in the space under a 15-year contract.

In addition to his role as a vanguard in commercial real estate, Carey will be remembered as an altruistic individual who was well known in charitable circles. He established the W. P. Carey Foundation in 1988 to support educational opportunities at such colleges as Arizona State University, Johns Hopkins University and the University of Maryland. Carey ensured that his generosity would outlive him by naming the foundation as the primary beneficiary of his common stock in W. P. Carey.