Oxford Properties Group has unveiled plans to develop the new 40-story Ernst & Young Tower in the heart of downtown Toronto.

Upon completion in June 2017, the class AAA, LEED Platinum skyscraper will offer 900,000 square feet of space.

Ernst & Young, a global leader in assurance, tax, transaction and advisory services, will anchor the property, which is currently 45 percent pre-leased. Another major tenant includes TMX Group, whose key subsidiaries operate cash and derivative markets and clearinghouses for multiple asset classes including equities, fixed income and energy.

Located at 100 Adelaide St. W., between Bay and York streets, the Ernst & Young Tower will be part of Oxford’s full block Richmond Adelaide Centre mixed-use complex.

“Oxford creates exceptional workplaces for high-performing organizations,” said Blake Hutcheson, president & CEO, Oxford Properties. “Working closely with Ernst & Young and TMX Group, we are helping to create today’s state of the art knowledge workplace at 100 Adelaide West. This LEED Platinum building is another example of Oxford’s leading sustainability program and of our world class development program in Canada, the U.S. and the U.K. We are excited to work with both Ernst & Young and TMX Group, and to be building what will be one of our city’s most enduring office towers.”

Designed by architects Kohn Pederson Fox and locally based WZMH Architects, the building will create a high-quality, energy and cost efficient environment through the use of smart technology and productivity tools. The high-rise will feature multiple outdoor spaces, including a 5,000-square-foot terrace on the sixth floor, high performance building envelope and mechanical systems, on-demand fresh air, daylight and motion sensors, state-of-the-art lighting controls, bicycle storage, change rooms, showers and electric car parking.

Additionally, through stunning floor-to-ceiling windows and 9’6″ ceiling heights, the tower will offer 360 degree views of Toronto’s downtown skyline.

The leases at the Ernst & Young Tower represent Oxford’s first official use of a “Green Lease,” which incorporates commitments on how the building is to be occupied, operated and managed in a sustainable way.

“This new LEED platinum building represents a true workplace of the future, and Ernst & Young is very proud to be at the heart of it,” said Eric Rawlinson, Ernst & Young, Managing Partner, Greater Toronto Area. “Having the right workplace is a strategic business tool that empowers us to make a difference for our people, our clients, and our wider community. From the sustainable construction to the leading-edge design, we’re looking forward to watching the project come to life and become a new Toronto landmark.”

“As we have grown and diversified our organization, our efforts to integrate our acquisitions and optimize synergies have made clear the importance of a work space that fosters innovation and teamwork,” said Michael Vivaldi, TMX Group, Vice President, Finance & Administration. “We are excited about the LEED Platinum building at 100 Adelaide Street West, which will provide a state-of-the-art, sustainable workplace in close proximity to key local clients and readily accessible to transit options for employees.”

U.S. Bank has given a big helping hand in the addition of 165 new units to Los Angeles’ depleted affordable housing market. The bank is providing approximately $55.1 million to Retirement Housing Foundation for the development of the Broadwood Terrace and Las Alturas senior affordable housing communities.

“Affordable housing for seniors is an essential component to the health and vibrancy of urban communities,” Tiena Johnson-Hall, vice president with U.S. Bank Community Lending Division in Los Angeles, and member of RHF’s local advisory committee, told Commercial Property Executive. “We take pride in funding projects that, in addition to creating lively senior living communities, provide resources and services to help maximize quality of life for people in all of life’s stages.”

Groundbreaking for both LEED-certified properties is this month. Broadwood Terrace will carry the address of 5001-5025 South Main St. in South Los Angeles, and offer 88-units for seniors in a five-story building. In the Boyle Heights neighborhood, the five-story Las Alturas will be erected at 3545 East Whittier Blvd., featuring 77 units.  

U.S. Bank is supporting the Broadwood Terrace and Las Alturas projects with $24.9 million in construction debt, as well as approximately $30.2 million of Low-Income Housing Tax Credit equity through its tax credit investment subsidiary, U.S. Bancorp Community Development Corp. Currently, the LIHTC program is the vehicle that creates the nation’s only notable new supply of subsidized rental units, according to a report by the Joint Center for Housing Studies of Harvard University. 

In addition to the construction and LIHTC financing, U.S. Bank has committed to making another loan to RHF in the amount of $1 million for working capital.

“Growth in the number of individuals and families opting to rent has created a greater need in the market for affordable housing,” said Johnson-Hall. “Naturally, rental prices have increased as vacancy rates have declined in places like Los Angeles. This trend has had a particularly negative effect on those seniors who are living on a fixed budget, and don’t have as much flexibility in their monthly finances.” 

Broadwood Terrace and Las Alturas will open their doors to residents in late summer or early fall of 2014.  

U.S. Bank is consistently active in assisting to increase affordable housing availability in the U.S., not just for low-income households in general, but for often-forgotten segments of renters in the low-income bracket. Earlier this year, the financial institution came through with funding for the Stout Street Health Center & Renaissance Stout Street Lofts project being developed by the Colorado Coalition for the Homeless in Denver. U.S. Bank also closed a $15.5 million financing package for the development of Mercy Housing California’s 40-unit El Monte Veterans Housing community in Los Angeles County.

Liberty Property Trust announced that its 7259 Salisbury Road building has earned LEED certification from the U.S. Green Building Council (USGBC) under the New Construction rating system.

This recent designation marks the company’s third LEED development project in Jacksonville and it is the seventh LEED building to open in the state. Liberty now has more than 276,400 square feet of LEED certified office space in Jacksonville and more than 775,000 LEED certified space in Florida.

Encompassing 46,400 square feet, the 7259 Salisbury Road Class B facility offers tenants direct exposure to Interstate 95. LEED certification of the 7259 Salisbury Road building—developed in 2012—was based on a number of green design and construction features that positively impact the project itself. These features include: enhanced daylight views, use of FSC (Forest Stewardship Council) certified woods, Low-E High Performance Glazing, Low flow Water Fixtures, high energy-efficient HVAC equipment with special filters and carbon dioxide monitors, a highly reflective TPO roof membrane, as well as low VOC (volatile organic compounds) emitting paints, carpet and adhesives.

“LEED certified buildings are attractive to companies because they offer lower operating expenses and significant cost savings. We project an estimated 20 percent savings in energy costs by using high energy-efficient HVAC equipment and a 50 percent reduction in water usage using water reducing fixtures,” said Mike Heise, vice president and city manager for Liberty’s Jacksonville region. “Sustainable buildings also create healthier work environments for tenants and we will continue to develop LEED properties whenever we are able.”

Liberty has demonstrated its commitment to sustainability by investing more than $1.7 billion in sustainable office, flex and industrial development projects across the United States.

Image via CoStar

For more market data on Jacksonville, click here.

Norwich Research Park Enterprise Centre, courtesy of Architype

The University of East Anglia (UEA) in Norwich, England is about to break ground on the Norwich Research Park Enterprise Centre, an academic and office facility that promises to become the greenest commercial building in the United Kingdom.

According to CleanTechnica, Norwich officials have recently approved the project, which entails an investment of approximately £8 million (equivalent to more than $12 million).

Designed by Architype, the building will be the country’s first commercial development to obtain both Passivhaus and Breeam ‘Outsanding’ ratings. Morgan Sindall is also working on the project as the main contractor, along with BDP Engineers and Churchman Landscape Architects.

Through its new center, the University of East Anglia aims to create a leading green facility capable of achieving high levels of performance across a wide range of criteria, including an ultra-low degree of embodied carbon.

“Passivhaus is all about energy and comfort, it is proven to deliver very low energy but Breeam has all the other components so it was very important to have it all,” Architype associate director Ben Humphries told the newspaper.

“The other thing was having very low embodied carbon. We’ve comprehensively modeled the building over a 100 year life cycle which has really informed design choices.”  Humphries added. “We’ve worked with the university’s experts and modeled the building in terms of climate change – the building has been designed to achieve the Passivhaus standard up until 2080.”

The building’s sustainable features include triple-glazed windows, photovoltaic panels, solar heating and mechanical ventilation. Designed as a hub for low-carbon thinking, the project will also stimulate the regional economy through the use of local natural materials and products.

Upon completion in January 2015, the center will house offices, classrooms, meeting areas, and a large lecture hall. The facility will also serve as home to the Centre for the Built Environment, which will test and promote sustainable building materials.

The Norwich Research Park Enterprise Centre is partially financed by the European Union, through the European Regional Development Fund. Additional funding comes from the Biotechnology and Biological Sciences Research Council, Norwich Research Park, and the Building Research Establishment.

Architype is an award-winning architectural practice with offices in London and in Hereford. Led by directors Jonathan Hines and Bob Hayes, the company focuses on creating outstanding contemporary architecture using environmentally sustainable materials and methods.

KDC wants to bring its state-of-the-art corporate campus prototype to Lexington, Ky., and the commercial real estate and investment firm is under contract with Sperry Van Ness Real Estate Advisors-Lexington to do just that. KDC is planning to develop the KDC Corporate Center, a 250,000-square-foot headquarters destination at the University of Kentucky’s 735-acre Coldstream Research Campus.

The vision for KDC Corporate Center entails multiple buildings that will sprout up on a 38-acre site within Coldstream, which sits near downtown Kentucky. Such an endeavor marks a rare opportunity in the city. “Lexington is one of the most land-constrained markets in the country and developable land is at a premium,” Jeff Stidham, a vice president with KDC, told Commercial Property Executive.

The first phase of the project will yield a 100,000-square-foot structure designed to accommodate today’s users’ needs, especially their efficiency needs. The three-story building will feature layouts that promote effective use of space and employee productivity, and it will be high on sustainability. KDC will seek LEED certification for the property, which will offer such green features as increased daylighting opportunities and an under-floor system that will allow for energy cost savings of approximately 30 percent.

The initial phase of KDC Corporate Center will kick off upon the completion of leasing agreements accounting for 50 percent of the first building. The demand for premier space, KDC contends, exists and is on the rise. “There has been no new Class A office development of this type in more than ten years and there are currently no large blocks of Class A space in the market,” Stidham added.

KDC will capitalize on Coldstream’s proximity to the University of Kentucky and the presence of the 62 businesses that currently call the campus home to reel in lease commitments. “We are targeting research and development firms with close ties to University of Kentucky,” he sconcluded. “University of Kentucky’s pharmaceutical program is world-renowned and several national firms have substantial facilities here related to medical and pharmaceutical research.”

However, KDC is casting a wide net; the developer will market KDC Corporate center to office users beyond the research and development arena as well.

CBRE Strategic Partners U.S. Value 6, a Los Angeles–based fund sponsored by CBRE Global Investors, has purchased Three Ravinia, a 31-story, 813,750-square-foot trophy office building in north suburban Atlanta, the fund announced Friday. The off-market transaction was for $144.3 million, according to a release by the seller, Colonial Properties Trust, of Birmingham, Ala.

The building, developed by Gerald Hines Interests and completed in 1992, is in Dunwoody, in metro Atlanta’s Central Perimeter submarket, reportedly the largest concentration of office space in the Southeast.

“The Perimeter submarket experienced significant net office absorption in 2012 and is projected to have accelerated job growth in the near-term,” Vance Maddocks, president of CBRE Strategic Partners U.S., said in a release.

Three Ravinia is currently 91 percent occupied, and InterContinental Hotels Group occupies almost 50 percent of the building, a CBRE spokesperson told Commercial Property Executive.

As part of a strategy to address near-term lease expiration risk, the buyer is planning a capital campaign to upgrade building systems and the amenities package, as well as make cosmetic improvements to common areas and begin seeking LEED Silver certification.

The property was unencumbered, according to the seller, and sales proceeds were used to repay a portion of the outstanding balance on Colonial Properties Trust’s unsecured credit facility.

“The disposition of Three Ravinia is a significant step in the execution of our multi-family-focused strategy and strengthens the company’s balance sheet,” Colonial chairman and CEO Thomas Lowder said in the REIT’s release. “Following the disposition, 95 percent of the company’s net operating income will be generated from our multi-family portfolio.”

As of the fourth quarter, the average Central Perimeter Class A office vacancy was 15.3 percent, versus an overall 18.5 percent rate for metro Atlanta, according to CBRE. In addition, the submarket absorbed more than 950,000 square feet of office space in 2012.

CBRE Strategic Partners U.S. Value 6 has been very active of late. Among its recent acquisitions was its first hotel, the 506-room San Jose Marriott, for roughly $83 million.

180 Brisbane

Japanese developer Daisho Group has recently broken ground on a $300 million office tower in Brisbane, the capital and most populous city in the Australian state of Queensland.

According to Architecture & Design, the 34-story commercial project will bring the first speculative high-rise on the city’s skyline since the start of the global financial crisis. Colliers International and Knight Frank are the project’s leasing agents.

“As Watpac begins principal construction works, local and interstate companies are showing keen interest in becoming tenants of 180 Brisbane when it is completed in late 2015. These include mining and resource companies, professional service firms and others looking to establish or expand their presence in the Brisbane CBD,” said Yasuo Iwasaki, Daisho Group’s general manager.

Designed by Crone Partners, the new building at 180 Ann St. will offer approximately 630,000 square feet of space, including large floor plans, ground floor retail, a food court, an on-site management office and basement parking. Amenities also include direct escalator access off Ann Street, extensive landscaping, generous lounge and meeting spaces, secured bicycle storage, along with jogger and cyclist changing rooms, showers and lockers.

One of the most notable architectural features of the 180 Brisbane tower will consist of a distinctive river-shaped graphic wrapped around the building’s façade.

The project aims to achieve a 6 Star Green Star and 5.5 Star NABERS rating. Environmentally sustainable design features include reduced water and energy consumption, increased levels of fresh air, as well as a creative use of glass that maximizes natural lighting inside the building.

“Daisho has owned 192 Ann St. since 2001 and 180 Brisbane will be another high-quality addition to the city and Daisho’s long-term investment here. It will also rejuvenate the CBD by forming a new hub. which links key parts of the city’s center,” Iwasaki added.

Headquartered in Japan, Daisho Group is an international property developer with offices in Malaysia and Brisbane. Since it was founded in 1986, the company has amassed a portfolio currently valued at more than $1.5 billion.

In fact, noted Tom Poser, vice president with Jones Lang LaSalle Inc. in San Francisco, benchmarking details generally tend to be of far greater interest to tenants considering older and smaller properties, compared to those with immediate needs for modern Class A space.

Most owners of institutional-grade properties are already benchmarking with Portfolio Manager—and predictably specify energy efficiency and related characteristics in initial lease proposals even before addressing contract rents and related particulars, Poser noted. “These owners use the sustainability performance of their properties as a marketing tool.”

(Interestingly, as the New York City program’s initial disclosure report from last October illustrates, even some institutional-grade properties might not be as efficient as expected. For instance, the landmark MetLife building posted an Energy Star rating of 39 —far below the citywide median of 64. And even the relatively new 7 World Trade Center tower came up a point shy of the 75 required to boast the Energy Star label.)

On the other hand, in a softer market, tenants evaluating space in lesser-quality, smallish buildings in particular will value the more transparent energy data as they factor utility bills into occupancy cost projections.

Hence, while these ratings-challenged landlords “tend to not bring up that topic” in discussions with prospects and have expressed the strongest objections to being covered by the new and proposed mandates, Poser has little doubt that most owners of smaller commercial properties struggling to attract tenants are conversing with consultants and contractors specializing in energy upgrades.

Of course, smaller properties tend to post lower efficiency scores, and their owners often lack the financial resources for any needed retrofits. And programs that require periodic energy audits—San Francisco every five years, New York once per decade—are arguably disproportionately burdensome to smaller owners, as they might cost $20,000 or more even for a small property.

City officials, however, want to make sure compliance is broad enough to spawn competition-driven efficiency efforts but also want to avoid undue burdens on small-property owners in particular, noted Jessica Lawrence, program manager for building energy performance policy with the Institute for Market Transformation.

Indeed, after listening to feedback from smaller owners, representatives from the local BOMA chapter and others, administrators of Seattle’s benchmarking program last September re-set the minimum building size threshold from the initially planned 10,000 square feet up to 20,000. They also granted a six-month extension of the initial Oct. 1 reporting deadline for commercial and multi-family properties of 20,000 to 50,000 square feet.

New York, D.C., Philadelphia and Minneapolis all opted for the 50,000-square-foot minimum threshold, with the D.C. and New York mandates also covering residential properties. Boston’s proposal sets the threshold at 25,000 square feet, along with residential properties of 25 units or more.

Read more on the cities requiring benchmarking of energy efficiency in “Mandatory Benchmarking” in the June 2013 issue of CPE.

Conergy, the Hamburg-based energy company, is expanding its footprint in Romania with the development of a 2- megawatt solar power plant in the Slobozia region. Currently under construction on a 10-acre site, the facility will include over 8,000 Conergy modules fabricated in Germany.

Upon completion, the plant is expected to generate more than 2,700 megawatt hours of electricity annually, enough energy to power about 770 households. Furthermore, the project will reduce carbon dioxide emissions by 1,400 tons annually.

The Slobozia solar project is the second announced in Romania this year by Conergy. In January, the company announced a 2.2-megawatt solar plant in Bobiceşti near the town of Craiova (pictured). The company is teaming up with Solanna Investment S.r.l. to develop the plant, which is expected to generate about 2,840 megawatt-hours annually.

“Currently, Romania is covering around two thirds of its electricity demand by power generated in the country itself,” said Alexander Gorski, a member of Conergy’s board. “Large-scale solar power plants will be playing an increasingly important role in helping to enable the country to also satisfy the rapidly rising demand for electricity in the future. We intend to expand our business in this segment further in the years to come.”

Conergy’s solar park will become profitable thanks to a quota model that employs so-called green certificates and power purchase agreements, the company said. Unlike other European countries, Romania does not offer feed-in tariffs as subsidies for solar power projects. Instead, the state requires energy providers and energy-intensive businesses to obtain 14 percent of their electricity from renewable sources. That share will rise by 1 percent annually through the decade and reach 19.5 percent by 2019. For this purpose, energy providers need a certain number of green certificates.

Providers that fall short of the threshold must purchase the emission certificates for 110 euros each to make up the difference. Power plants with a total capacity of 10 megawatts currently earn six certificates for each renewable megawatt-hour generated over the subsequent 15 years. Starting next year, plants will receive only three certificates per renewable megawatt-hour. Conergy’s plant will receive an estimated 16,200 green certificates annually for producing 2,700 megawatt-hours, or about 243,000 over 15 years.

Until 2025, prices for certificates traded on the market will remain in a fixed range between 27 and 55 euros. Any certificates that remain unsold in a given year will be purchased at the fixed minimum price by the national energy regulation authority, known by the acronym ANRE.  Power plant operators earn revenue from sales of both electricity and green certificates. For the Conergy plant, the sale of green certificates could yield 6.6 million to 13.4 million euros over 15 years.

The temporary halt in development of Boston Properties’ 1 million-square-foot office project at 250 W. 55th St. in Midtown Manhattan grows smaller and smaller in the rearview mirror as building activity moves closer toward completion, and Arup is the latest participant in the endeavor to achieve a major goal. The engineering and consulting firm just reached substantial completion of the structure and envelope of the $1 billion building.

It was back in 2009 when Boston Properties suspended construction of 250 W. 55^th, but since 2011, when law firm Morrison & Foerster L.L.P’s pre-lease of 180,000 kick-started the project again, work has been moving forward at a steady clip.

Arup, which is teamed with the architectural firm of Skidmore Owings and Merrill L.L.P. on the design of the LEED-certified tower, has been quite crafty in realizing its objectives. The firm’s design integrates a creative viscous damping system that allowed for the reduction of steel tonnage by 10 percent and provided unanticipated additional elbowroom in the 40-story high-rise. “The firm’s engineering innovations helped us save $5 million and gave us more usable space per floor,” Robert Schubert, senior vice president of construction at Boston Properties, said in a prepared statement.

Indeed, 250 W. 55th is well on its way to completion. In May 2012, general contractor Turner Construction Co. topped out the structure, which, before year’s end, became 46 percent pre-leased with the 20-year lease comment to 246,000 square feet by another law firm. The building is on track to open its doors in early 2014.

A new breed of high-rise architecture is in the process of being born, thanks to the collaborative efforts of modern design pioneers. Envisioned as the best sustainable option for meeting world housing demands and decreasing global carbon emissions, wooden mega-structures are now one step closer to becoming a reality.

Photo credit: eVolo

“Big Wood,” a conceptual project submitted by architect Michael Charters to the eVolo 2013 Skyscraper Competition, builds on the premise that wood, when harvested responsibly, is one of the best tools architects and engineers have for reducing greenhouse gas emissions and creating healthy communities. Aspiring to become one of the greenest skyscrapers in the world, Big Wood challenges the way we build our cities and promotes timber as a reliable platform to support tomorrow’s office and residential towers.

Whereas the building industry accounts for 39 percent of man-made carbon emissions, according to the eVolo architecture and design journal’s announcement of Charters’ honorable mention win, timber emerges as a greener alternative to standard structural systems. In addition to its eco-friendly properties, timber is technically and economically competitive compared to steel and concrete, and can be employed in a broad range of building structures. “Recent studies have proved the success of 20- to 30-story mass timber structures,” according to eVolo,  while the use of hybrid systems would enable developers to go even higher with their projects.

Combining technological advances with conservation and sustainability features, Big Wood stands out as a masterpiece of modern engineering. It is a prototype on mass timber construction that offers the possibility to build more responsibly while actively sequestering pollutants from our cities.

To be developed along the Chicago River in the Windy City‘s South Loop neighborhood, the mixed-use university complex is built on a mass timber system. In yet a further sustainable step, the lumber used is not just locally grown and milled but the South Chicago tree farm from which it was obtained is on a remediated brownfield site that once sheltered the South Works steel mill and now bvenefits the entire area by extracting toxins from the soil as well as carbon dioxide from the air.

The astounding high-rise features three different housing types, retail, a library, a media hub, a sports complex, parking, as well as a community park and garden.

“Known as the birthplace of the skyscraper, Chicago is an optimal location for a prototype in mass timber construction,” writes Carlos Arzate in his description of the project in eVolo. “Similar to the rapid innovation in building technology that occurred in the early 1900s, ‘Big Wood’ is positioned to be a catalyst for a new renaissance in high-rise construction, forever changing the shape of our cities.”

Widely recognized thanks to the architectural efforts of Michael Green, a progressive architect who plans to erect a 30-story wooden skyscraper in Vancouver, the groundbreaking concept strives to address the major challenges of climate change, urbanization and sustainable development. In collaboration with structural engineer Eric Karsh, Green developed a mass timber panel approach solution for tall buildings called FFTT (Finding the Forest Through the Trees), which is adaptable to various architectural forms, including office and residential uses.

Tom Paladino founded Paladino and Co. in 1994 as a consultant on green building and sustainability. He helped develop the U.S. Green Building Council’s LEED green building rating system, directed its pilot program and has been technical editor and author of the version 4 reference guides. The company has provided both design and technical advice to a wide range of clients globally, including some of the biggest developers of green buildings, at the single-building and portfolio/enterprise levels. Paladino spoke with CPE editorial director Suzann D. Silverman about the commercial real estate industry’s progress in achieving sustainable design and what still needs to be addressed

Q. How do you see approaches among U.S. commercial real estate developers and owners changing toward sustainable design?

A. The definition of sustainable design is expanding to include planning, operations and asset management. The green building and sustainable design conversation really came out of the service providers, in many ways—first, the engineers and architects, and to some extent a few owners. But why there’s a new building, where there’s a new building, who’s going to sit in the new building, who’s going to run it afterwards and how do we know how to manage it, especially if it has new design features, is really the expanded conversation that seems to be happening among the leading commercial real estate groups. And by leading I mean those that are busy.
Some of the ones that are busy, which surprised us a little bit—but maybe not if you think about it—are the industrial facilities that might be involved in food production or food service. Everyone continues to eat, so we have a lot of industrial facilities that are getting on the green bandwagon but have really different characteristics than, say, knowledge-based, workforce office. …

And then, the service providers—architects and engineers and green building consultants—are pretty interested in this idea of net-zero, which is a building that can stand on its own from an energy or water point of view. But the commercial real estate sector, particularly in this economic climate, is pretty lukewarm toward that because it just doesn’t have a strong business case right now. 

Q. Do you think that’s just a temporary situation because of the economic climate, and as the economy improves that will change again?

A.The thing we’ve observed around some of the net-zero projects—and we’ve worked on a couple—is that it requires such a fundamental translation on the basics, like a useable floor area-to-systems floor area, or area of window wall-to-floor area served. It really challenges the comparables that other buildings are budgeted and designed around in such a transformative way that until the business climate gets better, it’s too big a reach for most commercial real estate projects.

Q. What are developers focused on?

A. We are seeing a growing interest in portfolio programs … particularly in the retail environment. That’s the end result of design expanding to include planning, operations and asset management. It’s just a larger span inside commercial real estate that’s beginning to address sustainability.

What’s interesting about the portfolio programs is that there are two sub-trends. One is that we’re seeing increased executive sponsorship around those initiatives: The sustainability thrust is coming from a real estate executive, a director or VP. High in the food chain, not the grassroots uptick we saw in the previous five years, which was really about the building and how we make it and how it performs on its own. This is an executive thing: There’s some proof of concept around that idea with one building; let’s apply it to our many in a way that lines up to the second sub-trend, which is, how can it improve business results for the enterprise around real estate?

Certainly in the last six months, it’s been a noticeable change. So something is thawing out there. Either the (corporations) are realizing this is the new reality and we’ve got to keep moving with our expansion, which requires real estate activity, or they’re making a market move, which is, we’ve acquired our No. 3 (competitor), or we’ve merged with another company to gain size and now we’ve got two disparate real estate portfolios that we have to somehow put together. And sustainability is a driver for the enterprise, so how are we going to embed that in real estate, especially as we consolidate people and processes? …

If we think about the industry meeting objectives generally, it seems like commercial real estate is a little bit stalled on “what do we do next with sustainability?” … (But) there is a lot of, I think, innovation or experimentation or examination of “how does sustainability help our enterprise win? And how does real estate contribute to that?” … There was a great vocabulary established with LEED and a lot of green building professionals created through the USGBC’s continuing ed program, more than any other sector. There’s nothing like that for product design. There’s nothing like that for workforce innovation. And there’s not that much around supply chain that’s as big as green building and LEED within the commercial real estate industry. So in a way, real estate can lead (corporate America) toward “here’s what works.”

Q. Do you feel that the commercial real estate industry has the right objectives?

A. It seems like LEED’s been a great proxy, but it’s somewhat become table stakes for a lot of commercial real estate. And now the question being asked is, How beyond just certification does it create business results? An example of that would be, there have been hundreds of buildings created under the LEED program that have attempted to accomplish—or have accomplished—the daylight credit. You know, daylight the floor areas so you can turn the electric lights off. You get more productivity out of the workforce if you do that. But where is the data around it? Has it worked or not? And if it does work, shouldn’t we be hitting that out of the park? I mean, commercial real estate knows how to measure a leasable area. Everyone kind of agrees on the formula, so there’s some way to move forward on optimizing that. But there isn’t a lot of agreement around what’s the right shape and block-and-stack and floor-area ratios to create a daylit building that really responds to the productivity gain that we all think is happening but nobody’s really measuring yet.

Q. So there really hasn’t been much focus on achieving some basic standards for what works best?

A. Right. And any feedback on what is working best. I think that’s one of the crazy anomalies of the real estate industry: that it’s a huge industry that builds projects or products, if you think about it, with a revised process every time. Every building’s a custom build. I know the industry strives for standardization, but putting the parts together—the different site, the different owner needs, the different design team combinations—it’s highly customized. And there are industry standards on what’s the formula for optimization … (but) that’s about measuring what got put in place, not what happens after it’s there and how it performs. That’s less studied. When you make a car, when you design a new car—like a new hybrid, where you change the engine out and put in batteries—it’s a pretty big custom job. And then the auto industry knows how to innovate and then measure and refine and release and refine and release, whereas with commercial real estate, it’s like, “Well, that was an interesting project. We flipped it and made money. Let’s go do another one.” There’s not a lot of introspection or formal feedback.

Q. Where do you still see the biggest need for improvement? And what concerns you the most?
A. There is some missing capability in the field. There are 200,000 LEED APs out in the market right now, and they are the predominant green real estate experts because there aren’t any others, so they dominate. But they’re somewhat focused on LEED, which is an energy and environmental performance play—it’s not particularly lined up to business results, nor is it lined up to the way commercial real estate is developed, say, inside the Fortune 1000 space.

So a lot of experience around one-off buildings, but it’s not yet easily transferrable to the real estate pipeline, particularly one that’s growing year over year, one that’s dynamic. So you have a miss in terms of the professional service or the talent on commercial real estate in that we’ve got the environment and energy performance part figured out. There’s a new real estate executive on the job coming out of the C-suite, someone who’s trying to line up real estate to corporate social responsibility and global reporting and carbon. But there’s nobody who knows how to really link it all up; there is no professional that’s tasked with that.

The biggest need for improvement I see is that next generation of professionals really has to learn how to work closer than ever—design plus development, and that would include, under development, enterprise driving the program, facilities management driving the operations of the project, and construction building

it the way that is most flexible for the future.
There’s a lack of an overall strategy when sustainable real estate portfolio programs get out of the gate these days. Mostly what’s happening, or what we see, is a notion of, well, if it worked great on one or two or 10, let’s do it on all. And then the spend to do that gets significant and nobody’s really measuring, well, are we spending effectively from a business results point of view—beyond that we’re good guys and we’re building buildings in line with our core values around corporate social responsibility?

Q. Do you think that’s the next phase? Do you think people are starting to realize they need to do that?
A. What’s happening is that the enterprise and product development and market share initiatives that most Fortune 1000s have learned to do quite well around their core competency is showing up at the real estate executive team level in a way they haven’t seen before. I think that’s the significant change or the readiness question for commercial real estate execs: Can I line up to that process? Do I understand enough about sustainable design and how the building can affect enterprise and produce results well enough to put it into that business case format? …

There’s a higher hurdle for real estate to get over than in the past, when their view was, “Well, you know, we have a certain amount of dollars on our balance sheet in real estate and we’re kind of trending along and everybody’s fat and happy with business as usual.” I think that’s the change we’re seeing.

Q. And with a multi-tenant building you’d have to find ways to measure performance that can apply to all the different types of tenants, as well as the property owner.
A. We could look at that a couple of ways. One is, what is the purpose of the owner? For a real estate investment trust or a developer of build and hold, it’s probably something around, “How do I maximize my building performance with a disparate set of users that are all over the map in terms of energy use or hours of occupancy or modes of transportation to and from the building—where I have an old-school company where maybe everyone needs to drive and then I have a young upstart company where everyone wants to ride their bike.”

How do you handle cars and bikes, because parking spaces are really expensive to build and bike racks are not, but then you need showers, which are also expensive to build.

How does the product change to accommodate the dynamic and the shifting workforce would be the question that the developer would need to answer. … What if growth was not about the old world model, where growth equals more square footage? You’d have a small tenant you’d hope to move from suite A to A plus B, and then A plus B plus C. What if it was, “Well, I really need to accommodate their growth in terms of can we densify rather than get more square footage?” Is there a way to provide amenities that will have more workstations that are touchdown points that maybe are in a common area rather than the leased area? Is there a way for me to allow them to grow one per seat versus doubling up on desks until it’s completely unworkable and then they finally take some more space? Or what often happens is they change buildings.

As a developer with office space, do I need to become more versatile around IT, because if I can locate them in buildings I already own and you add expansion space through an IT connection, is that another way to grow a tenant? As a tenant, do I let people work from home but beef up the amenities at the office so I attract them to the office, where the collaboration happens, and yet not have to pay for the real estate that I typically would in the old model?

Q. Where has the commercial real estate industry made the greatest progress?

A. You can’t go to any commercial real estate conference where there isn’t either a sustainability track or it’s actually the theme of the entire conference. It seems to be very well established as a core element, not a fad or a trend. I think most people think it’s here to stay. And I think that’s true because the drivers for sustainability at the meta level, at the industry or even at the societal level, are real.

Climate change, regardless of the source, seems to be here. It’s not predictable the way it used to be. The introduction of technology in the workplace and the changing age shift in the mean worker are creating demand for a lot more mobility. Employees view themselves as self branded, and they move their talent around to where the best opportunity is. It’s not like you go and work for someone for a long time and retire out of there. That model’s gone. And energy and water demand issues are acute, and our population continues to grow, and we continue to put demand on energy use for information technology, which takes it away from other sectors. So that pressure’s not going away. That’s why we’re seeing so many renewable energy projects around the country: is the growing awareness that we need new energy sources.

The Programs

Following are updates on the certification activities of existing rating systems, including counts of ratings issued in 2012. First are details on the general commercial programs, and then those of some of the more targeted systems.

LEED

The USGBC and the affiliated Green Building Certification Institute had certified just under 15,000 U.S. commercial projects as of mid-March, with total floorspace fast approaching 2 billion square feet. The count grew by more than 3,660 projects totaling nearly 400 million feet last year alone.

Assuming a membership green-light this summer, anyone wishing to adopt LEED v4 under its pilot program will probably be able to do so by the end of the year. But USGBC higher-ups have confirmed that projects can still be registered under the prevailing LEED 2009 version through mid-2015.

LEED v4, in addition to substantial and wide-varying updates of credit scoring, is set to introduce versions of the LEED for Existing Buildings: Operations and Maintenance (EBOM) rating system devised specifically for schools, retail centers, data centers, hospitality properties and warehouses. It further advances environmental footprint issues such as climate change, while more intensely encouraging efficient consumption of energy and water.

As for whether the GSA will diversify by tapping Green Globes and/or LBC in addition to LEED, Diana Fischetti, commercial program manager with the Earth Advantage Institute,  thinks taxpayers would be best served by a strategy embracing any of several viable ratings systems that proves most beneficial for any given situation—for instance, depending on a project’s size, function, configuration and location.

“Blanket mandates (to use just one or two) just aren’t going to be cost effective over the longer term,” she suggested.

GREEN GLOBES

Green Globes administrator Green Building Initiative bills the system as a “streamlined and affordable” Web-based alternative to LEED. And as has been widely reported, sponsors of the U.S. version of Green Globes intended to make its lumber sustainability requirements less stringent than USGBC has continually required with LEED.

The GBI now administers three commercial modules: Green Globes for New Construction, Continual Improvement of Existing Buildings (CIEB), and a separate CIEB for healthcare properties. Federal agencies, and the Department of Veterans Affairs in particular, account for a huge portion of the CIEB-certified properties.

The GBI since 2006 had certified a bit more than 750 projects—with about 225 coming last year. Another 15 or so had been certified through March, with about 125 more applications pending. While LEED certification requires various mandatory “prerequisite” sustainability-related characteristics in multiple scoring categories, the Green Globes system does not.

SERF

The Society of Environmentally Responsible Facilities (SERF) team likewise sought a less time-consuming and costly rating system than LEED—but unlike Earth Advantage and EarthCraft Light (updates below) did not necessarily tailor it toward smaller properties.

Project sponsors handle much of the required assessment activities, then make the property eligible for SERF certification by having a licensed architect or engineer sign off on their work. The system strives for flexibility in accommodating multiple property categories: office, multi-family, retail, industrial, healthcare and institutional.

Since operations commenced in 2010, SERF has certified 66 properties, more than half of which (37) took place as the system caught on better last year. Another nine certifications were in processing at press time. Much of SERF’s activity to date has been in the Midwest and Southeast.

LIVING BUILDING CHALLENGE

Administrator International Living Future Institute bills the Living Building Challenge system as “the most advanced measure of sustainability possible in the built environment.”

While it can apply to renovations and virtually all structure types and sizes, the program primarily guides sustainable characteristics of new development projects, which must achieve prerequisites focused on seven specific performance areas. Reflecting the stringent requirements, only seven projects have achieved certification since ILFI began rating projects under LBC in 2010.

EARTH ADVANTAGE

According to Fischetti, recent analyses have concluded that buildings featuring 50,000 or fewer square feet of floor area account for nearly half of the commercial property sector’s energy consumption—and in fact represent the vast majority of all commercial buildings. But given prohibitive costs of LEED certification, a lot of small projects end up developed to LEED specifications but without going through the formal certification process, she noted.

Accordingly, EAI is now forging relationships beyond its Northwest roots—with an initial eye on the Midwest—working with a growing network of affiliated service firms and individual professionals that will help owners and managers pursue certifications under Earth Advantage Commercial’s new 2.0 version. At costs far below LEED, EAI has certified more than 50 commercial buildings during its early efforts.

And EAI’s active residential operation offers the Earth Advantage Multifamily program, which has likewise certified more than 50 properties totaling well over 2,000 units. Projects including several hundred more apartments are currently under application.

EARTHCRAFT

EAI has something of an affordability-minded Southeast regional counterpart in the Southface organization, which has likewise launched rating programs for both small commercial properties and multi-family projects.

The newer EarthCraft Light Commercial program, which is targeted primarily toward development ventures under 15,000 square feet, is up to 21 certified projects. EarthCraft Multifamily, operational for nearly a decade, certified projects totaling more than 5,900 apartments last year—bringing its total well beyond the 17,000 mark.

Designed with the hot and humid Southeast climate in mind, EarthCraft Light Commercial has been active in Georgia, Tennessee, the Carolinas, Alabama and Virginia—with a partner organization providing multi-family certification activities in Virginia and Maryland.

NGBS

Various stakeholders including the National Association of Home Builders have already been fine-tuning an apartment development and renovation rating system for several years, with the resulting National Green Building Standard administered by Home Innovation Research Labs, until recently known as the NAHB Research Center.

Like their EarthCraft counterparts, the NGBS multi-family team has been quite busy of late, certifying 313 properties totaling just under 5,800 units last year alone. The total tally as of late March came to about 11,150 units within 525 properties, with more than 28,000 additional units in nearly 700 communities in processing.

Compiled by Brad Berton. You’ll find more on rating systems’ advancements in “Color Me Greener” in the May 2013 issue of CPE.

In Manhattan, the South Tower high-rise at Hudson Yards, the 13 million-square-foot mixed-use project being developed by Related Cos. and Oxford Properties Group, has just reached a total of 80 percent in occupancy commitments with two new lease agreements. Cosmetics giant L’Oréal USA and software concern SAP have signed on for a combined 517,000 square feet at the 1.7 million-square-foot building where they will share the tenant roster with luxury leather goods provider Coach Inc. 

L’Oréal has inked a lease for 402,000 square feet at the South Tower, paving the way for the company to relocate its U.S. corporate headquarters from 526 W. 34th St. to the LEED Gold-certified skyscraper at the corner of 10th Ave. and 30th St. SAP, which leased 115,000 square feet, will hold the distinction of occupying the top four floors of the 47-story building.

The new lease agreements come roughly 18 months after news emerged that Coach had acquired 740,000 square feet in the South Tower for its global corporate headquarters, taking on the role of anchor of the Kohn Pedersen Fox Associates-designed building. 

Where leading businesses go, others follow. “We are seeing a lot of diversity in companies that are interested in both purchasing and leasing space at Hudson Yards,” Jay Cross, president, Related Hudson Yards, told Commercial Property Executive.

There’s ample time for Related and Oxford to find new neighbors for L’Oréal, SAP and Coach at the South Tower, which will also feature ground level retail. There are more than a few selling points. “Hudson Yards offers best-in-class office space, dynamic retail and restaurants, cultural programming and over 12 acres of open space, all in one environment,” Cross said. “It’s an unprecedented opportunity for domestic and international brands, and there has been a very strong demand from large user for the office space.”

Tutor Perini Building Corp. is onboard the project as construction manager and is on schedule to complete activity in time for the South Tower to swing open its doors to tenants in 2015. 

It takes more than chump change to develop a premier office building in New York City, let alone a 6 million-square-foot mixed-use destination. However, it appears the lending community is more than willing to get behind the endeavor, which is expected to revitalize the Hudson Yards neighborhood and bring new life to Manhattan’s West Side.

Yesterday, Related and Oxford revealed that they had closed on approximately $1.4 billion in equity investments and debt financing for Hudson Yards. A group that Related and Oxford described in a press release as “prestigious consortium of investors and lenders” will finance the South Tower, the first tower in the first phase of the sprawling development. In addition to Related, Oxford and Coach, equity investors in phase one of Hudson Yards include institutional investors advised by J.P. Morgan Asset Management and a prominent sovereign wealth fund. Construction financing to the tune of $475 million is being provided by a group spearheaded by Starwood Property. Starwood will contribute $350 million and the remaining $125 million will come from the other partners, the United Brotherhood of Carpenters and Joiners and Oxford.

A mere 18 months after Liberty Property Trust and Synterra Partners broke ground on GlaxoSmithKline’s new 208,000-square-foot office building, located in the Navy Yard Corporate Center at the Philadelphia Navy Yard, the pharmaceutical giant has settled into its new digs. The $150 million project is serving as an additional tenant magnet for the Navy Yard, as well as an example of a progressive new work environment. 

“[The GSK development] has had and will continue to have a very large impact on continuing the building up of momentum at the Philadelphia Navy Yard,” John Gattuso, senior vice president & regional director of Liberty’s Urban and National Development team, told Commercial Property Executive. “That project has seen now over a half-dozen office buildings completed and several more are scheduled to start in the next year or two.” 

Liberty and Synterra invested $80 million and GSK contributed $70 to realize the four-story facility at Five Crescent Dr., which GSK will occupy under a 15.5-year lease. The property, designed by Robert A.M. Stern Architects, is a model for the 21st century workplace. The building features a café, fitness facility, meeting centers and a multi-purpose room, but it’s the workspace that takes the concept of modern office accommodations to a new level.  Architectural firm Francis Cauffman was aboard the project as workplace strategist and brought to life the concept of an office space designed to foster collaboration and creativity by eliminating the walls and accenting the open floor plan with a four-story central staircase–encased in glass, no less.

“It sets such a new standard for the work environment so I think it will be very impactful not just at the Navy Yard and not just in Philadelphia, but nationally,” said Gattuso. “And I think more and more companies are looking at that work environment as something they need to at least think about and take into consideration as they plan for how they will work for the next several decades.” 

Five Crescent also holds the distinction of being the first double LEED Platinum-certified building in Philadelphia, with Core & Shell and Commercial Interiors certifications from the U.S. Green Building Council.

Setting up shop at the Navy Yard marks a relocation for GSK, a longtime resident of the City of Brotherly Love. The 2011 announcement of the pharmaceutical company’s impending move to the Navy Yard was accompanied by the realization that a large chunk of empty space would be added to the market with the company’s departure from its offices at One and Three Franklin Plaza in the Center City submarket. However, local industry experts are undaunted by the notable vacancy. “Center City Philadelphia is very vibrant, it actually has one of the lower vacancies in the country and I think those buildings will be absorbed in either office or new uses,” Gattuso said.

Indeed, the numbers in Philadelphia’s central business district are enviable. The vacancy rate at the close of 2012 was 9 percent, compared to 15.5 percent in Los Angeles, 12.1 percent in Houston, 10.6 percent in San Francisco and the national average of 15.1 percent, according to a report by commercial real estate advisory firm Integra Realty Resources Inc.  The Class A segment is the source of the market’s strength.

“The key to the Class A market is that there is a flight to quality, which often takes place during periods immediately following an economic downturn, like the one we just encountered during the Great Recession,” Joseph D. Pasquarella, a senior managing director with Integra, told CPE. “Tenants are attracted not only to the location, age and quality differences of Class A properties, but also to stronger and more professional management of the ownership that typically owns Class A property compared to Class B and C.”

Investors are paying attention; dollar signs are calling. “Philadelphia does not have an over-supplied Class A market, so prices are increasing especially for the higher floors in premium buildings owned and operated by the larger institutional investors,” Pasquarella noted. “It is also a good real estate investment long term as rents would have to rise considerably in order to support the construction cost of a new Class A property.”

And who says it’s all about the apartment sector in the current commercial real estate environment? “By comparison to the red hot multi-family investment market, Class A office investment in Center City Philadelphia offers better long term yield than other income producing property investments.”

Construction activity is underway for Jefferson Apartment Group’s latest project, Azul Baldwin Park in Orlando, Fla.’s thriving, 1,100-acre Baldwin Park neighborhood. JAG is developing the 178-unit luxury apartment property with investment partner Pacolet Milliken Enterprises Inc.

Azul is just one piece of JAG’s portfolio expansion plan for 2013. “JAG expects to develop close to $250 million and acquire another $100 million in multi-family assets this year,” James Duncan, a senior vice president and partner with JAG, told Commercial Property Executive.

JAG is not divulging Azul’s development cost; however, Wells Fargo is providing financing. Winter Park Construction is onboard the project as general contractor and is on schedule to complete construction of the apartment community’s four- and five-story LEED-certified buildings in the first quarter of 2014.

Designed to provide accommodations and an atmosphere resembling those of an upscale boutique hotel, Azul will cater to renters with higher-end tastes in a city where a growing jobs market has resulted in an increasingly loud cry for apartments. Sources of demand are within close proximity to Azul. The property, which neighbors the affluent town of Winter Park, sits three miles from thriving downtown Orlando and a dozen miles from the 650-acre Medical City health and life sciences park and its mushrooming employee roster.

“The established community of Baldwin Park has proven to be a premium residential location,” Mike Mulhall, a senior vice president and managing partner with JAG, said in a prepared statement. “Coupled with the exceptional medical-related growth on the horizon for the area, Jefferson Apartment Group anticipates Azul to deliver marked and enduring results.”

The apartment market is on the upswing across Orlando, where the average vacancy rate is on track to continue its decline, dropping to an anticipated 5.2 percent in 2013, according to a report by Marcus & Millichap Real Estate Investment Services.

JAG has an active year of building activity planned–and not just in Florida, where the company currently has four other apartment projects in the works.

“JAG is interested in major markets on the East Coast, particularly those with high barriers to entry,” Duncan told CPE. “We are currently working in metropolitan Boston, Philadelphia and Washington, D.C., as well as several Florida markets including Tampa, Orlando, Ft. Lauderdale and Palm Beach.” The company is also in the process of expanding its presence in Baltimore, where it recently broke ground on the 304-unit Jefferson Square at Washington Hill. JAG also hopes to open an office in suburban New York City this year.

Massena, N.Y., a town of about 11,000 near the Canadian border, is among scores of communities nationwide hoping that prospective investors and developers will soon start arriving on the heels of lengthy  environmental cleanups. In Massena’s case, the site in question is a 217-acre site on the St. Lawrence River where General Motors Corp. operated a manufacturing plant from 1958 to 2009.

By 2015, the decades-long project will wrap up, clearing the way for industrial redevelopment, reports Brendan Mullen, who oversees cleanup at four former GM sites in New York for their court-appointed custodian, RACER Trust (the acronym stands for Revitalizing Auto Communities Environmental Response).

Cleanup of the 217-acre site has been complex and painstaking, requiring tasks that range from demolishing the 855,000-square-foot main building to excavating contaminated soil and shifting the location of an industrial landfill.

In preparation for eventual redevelopment of a 218-acre site formerly occupied by a General Motors Corp. manufacturing facility in Massena, N.Y., the superstructure of the 855,000-square-foot main building was demolished last year.

Painstaking as the cleanup has been, the approach suggests broader lessons about preparing industrial sites for their next chapters: a highly motivated owner, a ready funding source and — no less valuable — a cooperative rather than confrontational relationship with regulators.

At nearly $121 million, the price tag for the cleanup of the Massena site will be the most expensive undertaken among the 89 industrial sites relinquished by GM as part of its bankruptcy reorganization. RACER Trust was tasked by the U.S. Bankruptcy Court with marketing the sites, which initially encompassed 6,000 acres and 44 million square feet of buildings; about two-thirds of the properties need remediation. To finance that work, the trust has a $500 million cleanup budget on top of $270 million for maintenance, taxes, security and other standard holding costs. Taking community input into consideration, RACER Trust seeks proposals from developers that can benefit economically hard-hit areas. As a further stimulus, RACER Trust also prefers to hire local firms for the competitively bid projects. Preference is also given to local contractors and consultants as a further economic stimulus.

Today’s cleanup has roots in 1984, when the U.S. Environmental Protection Agency added the GM property to its national roster of remediation sites. Under its watchful eye, GM undertook a wide-ranging cleanup in the 1990s that included removing contaminated soil, dredging sediment from the St. Lawrence and Raquette rivers, excavating sludge from lagoons and installing wastewater treatment plants.

By the time RACER Trust took charge of the cleanup in 2011, the plant had already been shuttered for two years. Its first task was overseeing the dismantling of the 855,000-square-foot superstructure main building. In 2012, the priority was the removal of the building’s reinforced concrete foundation slab and underground tunnels directly beneath it. All told, demolition of the building yielded 16,700 tons of steel and more than 100,000 tons of concrete and soil, reported Mullen.

This year, the remediation effort is going deeper still, as excavation reaches as far as 50 feet below grade. Perras Environmental Control Inc., a local specialty contractor, will remove a 21,500-square-foot storage building in order to access the PCB-laden soil underneath it. Also on Perras’ to-do list: draining and excavating three process lagoons, plus dismantling an unused 10,000-square-foot wastewater treatment plant and a smaller support building.

Yet another set of tasks are ahead in the final two phases of the project. Next year, a contractor will pick a specialist to remediate another disposal area and move the toe of the slope of an industrial landfill 150 feet before capping it. Work is scheduled to conclude in 2015 with the installation of a permanent system of pipes, pumps and wells to treat contaminated groundwater.

The Massena cleanup, like others overseen by RACER Trust, is virtually free of the disputes with regulators that so often weigh down remediation efforts, project officials say. On the contrary, the EPA — the lead agency on the project — functions as a partner rather than an adversary. On March 13, for instance, federal and state regulators attended an organizational meeting with the RACER Trust team and Perras Environmental. “Typically, you would not see the regulators in that type of meeting,” said Mullen.

Participation of regulators enhances transparency, builds teamwork and fosters communication among all the stakeholders. It is impossible to place a dollar value on good will, but the spirit of cooperation also brings tangible benefits, Mullen contends. Working closely with the EPA and other agencies helps to streamline an approval process that might otherwise slow down the project. “Where we do really save our dollars is on that back and forth that we completely avoid,” he explained.

For more on brownfield remediation, turn to “Batting Cleanup” in the April 2013 issue of Commercial Property Executive.

An innovative system will capture and recycle waste heat at the $750 million, 1 million-square-foot Telus Garden mixed-use development in Downtown Vancouver, announced Telus Corp., the Vancouver-based Canadian telecommunications company and co-developer of the project. 

Operated by FortisBC, the regulated utility will cut the property’s carbon dioxide emissions 1 million kilograms annually by capturing and redistributing low-grade heat.

The innovative District Energy System, created in partnership with project developers Telus Corp. and Westbank, is among the first in Vancouver to use waste heat from a neighboring site to heat and cool a new development. The Telus Garden complex will be powered by waste heat from the company’s adjacent data center and the cooling system of the new office tower.

“The TELUS Garden District Energy System represents a shift in how we think about and utilize energy,” said Andrea Goertz, senior vice present strategic initiatives and communications for Vancouver-based Telus, in a news release. “By recovering energy that would normally be lost and putting it to good use, we are innovating through design to create one of the most environmentally-friendly urban communities in North America. It’s a powerful and unique system, and we are so pleased to be undertaking this landmark project with FortisBC, a company that shares our commitment to environmental sustainability and building healthy communities.”

Designed by Henriquez Partners Architects Telus Garden will be adjacent to Sky Train in Downtown Vancouver. The development will feature a 24-story, LEED Platinum office tower; a 53-story, 425-unit residential tower designed to LEED Gold standards; and retail space. Upon completion, Telus Garden will use at least 30 per cent less energy than a standard development of similar size. The office tower is scheduled for occupancy in June 2014; the residential building will follow in May 2015.

Provider and operator of logistics infrastructure Prologis is kickstarting the construction of a new, 451,000-square-foot industrial project in Tokyo’s Saitama Ken-O submarket .

Dubbed Prologis Park Kawajima 2, the development is located in the immediate vicinity to the Ken-O Expressway, and will provide easy access to the northern regions of Japan. Tokyo’s central business district is 28 miles away from the in-development project, providing quick access to one of the most affluent business centers in the world. Prologis will be using green technologies in the development and will also include renewable energy fixtures to the finished product. Kawajima 2 will benefit from a one megawatt solar system, an emergency disaster alert mechanism and a groundwater remediation system.

Due to its focus on environmentally friendly technologies and fixtures for Kawajima 2, Prologis is seeking CASBEE Saitama Class A certification for the industrial park. CASBEE – which stands for Comprehensive Assessment System for Built Environment Efficiency – is the green building management system, employed in Japan since 2001. CASBEE Saitama Class A is the highest level of certification available for Prologis Park Kawajima 2.

According to Prologis’ President, Mike Yamada, the company expects “growth in demand for high-quality Class A logistics facilities in the area due to the ongoing reconfiguration of the supply chain in Japan and the lack of supply.” He also mentioned that the company is focused on developing properties that can satisfy the existing demand in the industrial distribution sector.

Prologis currently provides about 21 million square feet of industrial and distribution space in the Japanese archipelago, with a list of collaborators that includes names such as: Hitachi Transport System, Panasonic Logistics, Sagawa Group, Nippon Express, Costco and Amazon Japan.

Real estate investment trust Investa Office Fund (IOF) has announced the acquisition the of a premium office project in Melbourne in partnership with Investa Commercial Property Fund. The partnership, which is paying around $462 million for the property dubbed 567 Collins St., will have an equal ownership share of 50 percent each. The land itself will cost approximately $38 million. Payment is scheduled to take place in mid-March.

“We are delighted to be adding this asset to our portfolio – premium grade assets seldom trade, and we have been able to secure this asset on an accretive basis at an attractive cash-on-cash yield. The acquisition allows us to increase our weighting to Melbourne without taking on leasing risk until at least 2019, whilst participating in an improving market over the medium term” IOF Fund Manager Toby Phelps said in a news release.

The purchasing partnership will fund construction through progress payments during development. In return, the partnership will receive from the developer interest and line fees of 6.75 percent per year of total project cost until June 2014, when it will increase to 7 percent. The property is expected to generate a cash-on-cash yield of 6.7 percent upon completion, scheduled for mid-2015. This project will translate into an annual $15.5 million for IOF before interest expense.

567 Collins St. is being developed by a joint venture consisting of APN Property Group and Leighton Properties.  The project broke ground in late January 2013 on a 42,431-square-foot tract of land at the western end of Collins Street in one of the most sought-after business addresses in Australia and at the gateway to Docklands and Melbourne’s central business district.  The 26-story tower is said to be the largest premium grade high-rise constructed in Melbourne in the past 25 years and will occupy a frontage in excess of 240 feet on Collins Street.

The high-rise with its 592,000 square feet of net leasable area will feature seven floors of podium campus office space and 16 levels of upper tower office, with the uppermost floor dubbed the Melbourne Room. Amenities will include a two-story fitness center, a two-three level foyer, which will comprise a lobby, as well as retail and café space, and plentiful open space.

Sustainability will be an inherent part of the project which will implement state-of-the-art technology to improve indoor air quality and efficiency and minimize water consumption. Sustainable transport initiatives will be promoted at 567 Collins St., which is in close proximity to all forms of public transport. The project is registered with the Green Building Council of Australia and will target a Six Star Green Star Office Design v2 Rating. It will also have five-star NABERS (National Australian Built Environment Rating System) Energy and Water ratings.

The joint venture of Cox Architects and Spowers is acting as lead architect on the project.

Although in its early stages of construction, the high-rise has tenant pre-commitments for 47 percent of its net leasable area. Among its tenant roster are Corrs Chambers Westgarth with a lease contract just short of 95,000 square feet and Leighton Contractors, which will be consolidating its presence at the location by bringing in some 600 employees from five different location to a recently signed lease of more than 136,700 square feet in the property’s campus component.

Hines Real Estate Investment Trust Inc. brings its ownership of the landmark Williams Tower in Houston to a lucrative end with the $412 million sale of the 1.4 million-square-foot office property to Invesco Real Estate. 

It’s the right time to sell a Class A office asset in Houston. “The Houston economy is one of the strongest in the world, so buyer interest is very high,” A. Blake Williams, a vice president with Hines, told Commercial Property Executive.

Hines REIT parent company Hines developed the premier 64-story building in 1983, creating what was then the world’s tallest skyscraper outside of a central business district. In 2008, Hines REIT added the property and its adjacent parking facility to its portfolio for $271.4 million. What a difference five years make; now Hines has walked away with a sum that marks $100 more per foot than the amount the company had shelled out to acquire the asset, which is linked via sky-bridge to the popular Hines-developed mixed-use Galleria.

Commercial real estate services firm Jones Lang LaSalle Inc. orchestrated the disposition of the iconic LEED Gold-certified high-rise on Hines REIT’s behalf, and investors from regions around the world–the Middle East, Asia and Europe included–flocked to Williams Tower with pocket books in hand.

“The property, occupancy and overall Houston market are in excellent form,” Williams said. Speaking of occupancy, one of the lead tenants at Williams Tower is Hines, which has called the art deco-style office high-rise home for years and will continue to maintain its 139,000-square-foot headquarters there under a new 10-year lease. Other businesses that have helped bring the occupancy level at the building, designed by renowned architects Philip Johnson and John Burgee, up to 95 percent include Williams Corp., NextiraOne, Ecopetrol America Inc. and drilling services provider Rowan Companies Inc., which renewed and expanded its lease to approximately 112,000 square feet at Williams Tower in 2012.

All signs point to a future of continued strong occupancy at Williams Tower, as well as in the City of Houston. “A big factor spurring demand for office product in Houston is the city’s robust job growth over the past few years, and the forecasted job growth that economists expect to continue over the next 3-5 years,” James J. Tramuto, a managing director with JLL, told CPE. “In addition, rental rates have steadily increased year over year, vacancy rates are continuing to decrease across the city, and the fundamentals just make sense. Bottom line: it seems like this is sustainable, and investors are recognizing that.”

Choice Hotels International Inc. has taken its Cambria Suites in Washington, D.C., project skyward, marking a big step in the $40 million development of the Silver Spring, Md.-based company’s first Cambria Suites property in its own backyard. Choice and partner Concord Hospitality hosted a “sky breaking” ceremony to celebrate the beginning of construction of the 182-room hotel, which will sit atop the new retail segment of the 1 million-square-foot CityMarket at O mixed-use destination.

Roadside Development, developer of the $300 million CityMarket, is also part of Choice and Concord’s hotel project. Not only will the property be the first Cambria Suites in the nation’s capital, it will be the first LEED-certified Cambria Suites.

With any real estate endeavor, location is key and Cambria Suites will sit in a prime location within close proximity of the 2.3 million-square-foot Washington Convention Center.

“The Washington, D.C. convention center generates about $400 million of economic impact for the District each year, yet there is still a shortage of hotel rooms for conference and tradeshow attendees as well as those people who work the show itself,” Michael Murphy, senior vice president with Cambria Suites, said in a prepared statement.

And then there’s the fact that the city’s overall hotel market is in relatively good shape. “In general, the Washington, D.C., hotel market had a flat year in 2012 and lagged the overall performance of the U.S. hotel market; however, Washington hotels were quicker to rebound from the recession than the overall U.S. hotel market, so in some respects the rest of the market used 2012 to catch up to the Washington market,” Jeff Higley, vice president, digital media and communications with STR, told Commercial Property Executive.

Cambria Suites Washington is on track to make its debut in the second quarter of 2012.

Piedmont Office Realty Trust boosted its Washington, D.C., area portfolio this week by acquiring Arlington Gateway, a 12-story, Class A office property and one of the top buildings in the Rosslyn-Ballston corridor, for $175.6 million.

The Atlanta-based office REIT purchased the 333,948-square-foot building at 901 North Glebe Road in Ballston, Va., from Arlington Gateway Investors L.L.C., which had owned it since 2005. The LEED gold and Energy Star-certified trophy property located about 10 minutes from Washington, D.C., sold for $526 per square foot, not a record for the area, but still considered on the high end.

“We achieved excellent pricing for our client while providing Piedmont the opportunity to execute its expansion plan into the Washington, D.C., region with a trophy asset that has strong cash flow,” Gerry Trainor, executive managing director of Transwestern, who represented the seller along with his D.C. Commercial Sales team, said in a news release.

Trainor declined to offer more details on the seller but the Washington Business Journal identified Arlington Gateway Investors, L.LC., as an affiliate of Dweck Properties, Ltd., which has been moving out of office properties into residential.

The building, located at the corner of Fairfax Drive and North Glebe Road, is two blocks from the Ballston Metro station, close to I-66, and next to the Westin Arlington Gateway hotel, which has 336 guest rooms and 10,000 square feet of meeting space. The area has a substantial retail and restaurant presence and a growing housing unit base. It is 99 percent leased to private-sector tenants including Towers Watson, a global professional services company, and Nixon & Vanderhye, a law firm.

“Rents are below market so there is an upside to push the rents up in the future,” Trainor told Commercial Property Executive.

Trainor said his team marketed the property for about a month in January and had “extremely strong” interest from more than 20 well-diversified bidders.

“The five that were in the final were very strong,” he said.

“People believe in the Washington market long-term,” Trainor said. “There is a flight to quality right now because people are still uneasy about the economy and sequestration. This is one of the finest buildings in Ballston. It’s almost fully leased. It’s what people are looking for – a Class A property in a Class A location.”

Bob Wiberg, executive vice president, MidAtlantic region and head of development for Piedmont, also talked about the superior quality of the building and the strong location.

“The RB Corridor is one of the most desirable and high performing submarkets in the Washington, D.C. region,” he said in a Piedmont news release. “Arlington Gateway’s strong position in this submarket, evidenced by its 99 percent leased status, makes this an ideal strategic investment for Piedmont.”

Piedmont focuses on Class A properties located primarily in the 10 largest U.S. office markets, including Chicago, New York, Los Angeles, Boston, Dallas and Washington, D.C. As of Dec. 31, 2012, the REIT’s 74 wholly-owned office buildings comprised more than 20 million rental square feet. The addition of Arlington Gateway gives the REIT a third building in the Rosslyn Ballston corridor. It owns 3100 Clarendon Blvd. and 4250 North Fairfax Drive along with numerous other office properties in northern Virginia, Maryland and Washington, D.C.

“This acquisition demonstrates Piedmont’s strategic deployment of capital into one of our concentration markets,” Raymond L. Owens, executive vice president, Capital Markets, stated in the Piedmont release. “This transaction will provide us with stable income from a high-quality office building, and it builds upon our critical mass in a submarket that we feel has strong long-term potential growth.”

Clarion Partners, L.L.C., a New York-based real estate investment manager, has completed the sale of 100 Spear Street, a Class A, LEED Gold office tower in the heart of San Francisco’s Central Business District for $100 million.

The buyer was not disclosed, but published reports list the buyer as Prudential Financial.

“We have a very hands-on, pro-active management approach with respect to all of our portfolio properties,” Mark Weld, Clarion Partners’ managing director, said in a prepared statement. “San Francisco in particular is a dynamic marketplace where we have recently aggressively executed on opportunities on both the buy- and the sell- side and expect to continue to do so.”

100 Spear Street is located in San Francisco’s South Financial District, closely situated to the future site of the Transbay Transit Center, which is slated to be the largest transportation hub ever built on the West Coast.

The 22-story office tower consists of 203,259 square feet of commercial space, which is currently 91.5 percent leased, by companies including Kidder Mathews, Pond North L.L.P. and the law firm, Kerr & Wagstaffe  L.L.P.

Originally constructed in 1984, the building recently underwent a modernization program, which saw the renovation of the main lobby, remodeled multi-tenant floors, an upgrading to the elevators and improved fire-life safety features.

The building scored an energy efficiency rating of 90 in 2012, which is the average for all California Energy Star Buildings & Plants.

Gerry Rohm, Michael Leggett and David Karol of the San Francisco office of HFF represented Clarion in the transaction.

A large leasing deal was recently completed at Brookfield’s Bay Adelaide Center in downtown Toronto. According to a statement released by the company, the last company to announce its commitment to the in-development office project is Borden Ladner Gervais L.L.P., a full-service law firm. BLG will be occupying 165,000 square feet of office space in the Bay Adelaide Center’s East tower.

The building, on which development is progressing with a 2015 deadline, was given a major boost with an announcement made by Deloitte in June 2012 regarding the lease of 420,000 square feet of space at the new facility. With an anchor tenant in place, and a total of 43 percent of its space already leased out, the East tower of the Bay Adelaide Center carried on with development. Now, the addition of another major name to its already impressive tenant roster taking its occupancy rate to 60 percent seems to secure the building’s prosperity even as it stands two years away from completion.

Bay Adelaide East will be a 44-level, 980,000-square foot, Class A office high-rise offering tenants an eco-friendly, LEED Platinum-certified work environment. The best-in-class facility, along with Bay Adelaide West, will constitute one of the prime spots for office space in Toronto’s financial district. Bay Adelaide West is a 51-story, 1.2 million square-foot office tower that was completed by Brookfield in 2009, in the immediate vicinity of the site set to host Bay Adelaide East. The western tower currently has an occupancy rate of around 95 percent.

“Bay Adelaide Centre has become the newest premier professional precinct in downtown Toronto,” said Brookfield Office Properties’ President and CEO, Jan Sucharda.

And this project is not stopping with the completion of the East tower, as Bay Adelaide North is zoned for an additional 500,000 square feet of commercial real estate development.

The 40-story 600 Brickell building can now pride itself with a rare designation that makes it unique in the Florida market—placing it among only a handful of its class and size in the world—after being certified LEED Platinum by the U.S. Green Building Council.

The 600,000-square-foot mixed-use commercial tower set in the heart of Miami’s financial district was delivered to the market in August 2011. The 600 Brickell at Brickell World Plaza has already brought a top technology award to developer Foram Group, receiving the Greater Miami Chamber of Commerce’s Technology Leader Award for Best Project in 2012.

Designed by global architecture firm RTKL, the $300 million tower features central monitoring and control of air quality, temperature and lighting—resulting in a healthier, more comfortable and more secure working environment. It also incorporates fully redundant electrical backup systems, as well as both public and secured WiFi and direct access to the world’s Internet backbone through underground, redundant fiber-optic connections linking directly to the NAP (Network Access Point) of the Americas less than one mile away.

600 Brickell is the first “Class A” office building of this magnitude to be ISO 27001 Certified, the internationally accepted benchmark for information security.

The U.S. Green Building Council recognized 600 Brickell for its merits of achieving efficiencies in energy, lighting, water and material use, as well as that of incorporating a variety of other sustainable strategies to reduce its carbon footprint. The tower received the designation in the core and shell category, which applies to new construction.

“Every detail of this building was planned and examined before one shovel of dirt was ever turned,” said Loretta Cockrum, Foram’s founder, chairwoman and CEO. “We wanted to build something that would be as relevant 50 years from now as it is today. We have achieved our goal.”

Image via 600 Brickell official website

The $400 million Albert Sherman Center, a 512,000-square-foot biomedical research and education facility has opened at the University of Massachusetts Medical School campus in Worcester, Mass., doubling the school’s research capacity.

Construction of the 11-story building began in April 2010 and was recently completed by Suffolk Construction, a privately-held construction management company based in Boston. It was designed by ARC/Architectural Resources Cambridge and PMA Consultants served as project manager. The LEED Gold-certified building has nine occupied floors with two floors above for mechanical equipment.  It will serve as the hub of the Worcester campus and connect to existing buildings with landscaped plazas and two elevated pedestrian bridges. The project also included construction of a nearby 1,411-space, seven-level parking garage.

Suffolk used Virtual Design and Construction/Building Information Modeling during the construction process, which allowed the school to have six-dimensional facilities management models for facility planning, operations and maintenance of the building.

“This unique project gave us an opportunity to implement the most innovating planning and construction methods in the industry, including virtual design and construction and six-dimensional modeling,” Peter Campot, Suffolk’s president of Healthcare and Science-Technology and chief innovative officer, said in a press release from Gov. Deval Patrick’s office. “These state-of-the-art processes and tools, along with our ‘build smart’ approach to construction management, allowed us to deliver a facility that will set a new standard for biomedical research for generations to come.”

Aided by $90 million in funding from the Massachusetts Life Sciences Center, the Albert Sherman Center is owned by the University of Massachusetts Building Authority. It has research laboratories, six learning community centers, a 350-seat auditorium, conference rooms, café and dining area and fitness center. It is now home to the Advanced Therapeutics Cluster, which is comprised of the RNA Therapeutics Institute, the Center for Stem Cell Biology and Regenerative Medicine and the Gene Therapy Center. Among the goals of these researchers is finding new therapies for diseases including cancer, cystic fibrosis and amyotrophic lateral sclerosis, ALS, also known as Lou Gehrig’s disease.

“The completion of the Albert Sherman Center is a transformative event in the history of the Commonwealth’s medical school,” Chancellor Michael F. Collins said in the news release. “It would be hard to overstate the importance of this new center to our campus or the positive impact of the work that will go on within it.”

Patrick has made funding and expanding life sciences and biomedical research facilities in Massachusetts a priority. In 2007, he proposed the Massachusetts Life Sciences Initiative. It was passed by the state Legislature and became law the following year. The state is investing $1 billion over 10 years to grow the sector. Last month, Patrick’s budget proposal for the upcoming fiscal year included a $25 million investment for the Massachusetts Life Sciences Center.

While the Albert Sheman Center is a publicly funded project, the greater Boston area has the largest privately funded construction pipeline of life sciences real estate, according to bioSTATus-Winter 2013, a semiannual report on biotechnology real estate produced by Richards Barry Joyce and Partners, L.L.C. of Boston. The report released in December notes that marketwide vacancy for laboratory properties has dropped to 9.7 percent. It states that 11 biotech-related projects with a total of 3.4 million square feet are currently under construction in the region. Most of it is already pre-leased, according to the report.

“With each passing quarter, we run out of superlatives to describe how the region’s laboratory real estate market has performed,” Brendan Carroll, senior vice president of research for the firm, said in a press release about the survey.

A report by Newmark Grubb Knight Frank, Massachusetts Second Half 2012 Life Sciences Market Overview, noted that state initiatives like the Massachusetts Life Science Center have helped smaller firms locate in the area and join the large biotech and pharmaceutical firms already there and growing. That report states that the average asking rent in Massachusetts for laboratory space was $41.76 per square foot, a 6.9 percent increase over the previous year. East Cambridge is the hottest spot in the market for biotech and life sciences development but other areas have been growing too. Bedford, Beverly, Lexington, Waltham and Watertown are expected to benefit as companies unable to get space in East Cambridge look elsewhere.

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One day after announcing it was breaking ground on SLS Las Vegas, hospitality developer SBE Entertainment Group L.LC. said it was bringing the SLS hotel brand to downtown Seattle, where it will team with Stockbridge Capital Group and Daniels Real Estate to put a 184-room luxury hotel in Daniels’ planned $400 million mixed-use tower.

The 43-story building, the tallest to be erected in the city in 20 years, will be located at Fifth and Columbia in downtown Seattle. SLS Hotel Seattle will occupy floors 2 through 15, with 184 guest rooms and suites; 30,000 square feet of food and beverage outlets; more than 20,000 square feet of conference and event space; a spa and fitness areas.

Construction of the tower, which will have 528,000 square feet of Class A office, is expected to begin in the fourth quarter of this year with completion slated for 2016. Famed designer Philippe Starck will design the hotel spaces. Jose Andres, an award-winning chef and SLS Hotels culinary director, will develop the food and beverage concepts.

“We’ve had our eye on Seattle for years, and with the local hospitality market trending in a very positive direction, we’re extremely pleased to announce our plans for SLS Hotel Seattle,” Sam Nazarian, founder, chairman and CEO of SBE, said in a news release. “Stockbridge Capital and Daniels Real Estate are leaders in architectural excellence and along with the legendary designer Philippe Starck, Fifth and Columbia will add yet another chapter to the celebrated legacy of the SLS Hotels brand, while offering a tailored and unique hotel experience.”

“Fifth and Columbia with SLS Hotel Seattle will raise the bar in Seattle luxury hospitality and Class A real estate development,” Kevin Daniels, president of Seattle-based Daniels Real Estate, said in the release. “We both have a mission to redefine standards of excellence and innovation.”

ZGF Architects, specialists in sustainable design, are also part of the team. The tower is expected to be one of the first high-rise office buildings in Seattle to earn Gold certified LEED status. One of the ways the project will be using sustainable design is the plan to preserve and re-use the nearly 100-year-old First United Methodist Church on the site.

Daniels and Stockbridge bought the site in 2008 and began receiving city approvals for construction but put off development because of the financial crisis. Now that the city is on an economic upswing and the hotel market is improving, the developers began moving forward with the project. Kidder Matthews reports in its Real Estate Market Review for the second quarter 2012 that hotel occupancy rates have recovered to pre-recession rates.

“The recovery has been most rapid for upscale hotels in and near Seattle, where occupancy rates are at or near stabilized levels,” the report stated. “With improved performance and a loosening of credit restrictions, there is renewed interest in hotel acquisition and development.”

The Kidder Matthews report noted that average room rates for hotels in the Seattle CBD rose 7.7 percent from $183 per night in 2011 to $197 per night in 2012. Daily RevPAR was up 8.1 percent from $140 in 2011 to $152 in 2012.

SBE is moving ahead not only with the Seattle hotel, but plans for SLS Las Vegas, which the company said Wednesday would open in fall 2014 on the site of the former Sahara Hotel & Casino. Stockbridge, a real estate investment management firm with about $5.2 billion in assets under management, is also the equity partner on this project with SBE. The companies are planning a $300 million renovation of the old Sahara property, which they bought in 2007 for an estimated $300 million to $400 million.

SBE also owns SLS Hotel Beverly Hills and the Redbury in Los Angeles and The Raleigh and SLS Hotel South Beach in Miami. The company, which developed and operates L.A. hot spots like Katsuya by Starck and Hyde Lounge, is also planning hotel and restaurant projects in New York, Chicago, Washington, D.C., Philadelphia, Austin, Texas, as well as in the Middle East and Asia.

Daniels, a leading Seattle developer, is building Stadium Place, a 1.5 million-square-foot mixed-use project on four acres near CenturyLink Field in the city. It will be the largest transit-oriented development in the Pacific Northwest and feature residential, office, retail space and a hotel. Work on the first phase began in 2011.

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Suzan Amato of TIAA-CREF

Norges Bank Investment Management, manager of the Norwegian Government Pension Fund Global, has entered into a $1.2 billion joint venture with TIAA-CREF, of New York, and has at one stroke gained substantial interests in five Class A or boutique buildings on the East Coast, TIAA-CREF announced Monday. This is the first U.S. real estate investment for the fund.

The joint venture is currently invested in properties totaling 1.9 million square feet that TIAA-CREF already held in its portfolio, a TIAA-CREF spokesperson told Commercial Property Executive. In addition, the JV partners plan to invest in further high-quality office properties in Boston, New York and Washington. TIAA-CREF owns a 50.1 percent share and will manage the joint venture; NBIM holds the remaining 49.9 percent share.

The Norwegian Government Pension Fund Global is invested in equity, fixed-income and real estate markets, with total assets of about $650 billion as of the end of September 2012.

“This partnership will allow us to take advantage of opportunities to invest in high-quality real estate that do not come to market frequently and to further diversify our portfolio,” Suzan Amato, TIAA-CREF’s head of global real estate strategic joint ventures, told CPE.

“NBIM is an excellent partner for us, as we share a similar approach to real estate investing: a long-term investment horizon and an emphasis on large, high-quality assets in gateway cities,” said Tom Garbutt, head of global real estate for TIAA-CREF. “Our relationship with NBIM extends our real estate investment platform at a time when we see compelling investment opportunities.”

The five buildings are:

* 33 Arch Street, a newly built 32-story, 603,300-square-foot, LEED Gold office building in Boston’s Financial District.

* 470 Park Avenue South, New York, an approximately 292,000-square-foot boutique office building in the Midtown South submarket. It occupies the full block front between 31st and 32nd streets on Park Avenue South.

* 475 Fifth Avenue, New York, a 24-story, 275,700-square-foot office building, built in 1925, at the southeast corner of 41st Street and Fifth Avenue. The property, directly across from the main entrance to the New York Public Library, is being redeveloped as a Class A office building.

* The Evening Star Building, 1101 Pennsylvania Avenue, Washington, D.C, one of only 13 privately owned office buildings between the White House and the U.S. Capitol on Pennsylvania Avenue. Originally constructed in 1898 to house the Evening Star newspaper staff, and with its façade designated as an historic landmark, the building was renovated and expanded in 1989.

* Franklin Square, 1300 I Street, Washington, a 12-story, 464,000-square-foot Class A office building designed by Philip Johnson. The property is in the East End submarket between 14th Street and 13th Street Northwest at the foot of Franklin Square Park.

TIAA-CREF currently manages real estate investments on behalf of APG of the Netherlands and the Future Fund of Australia.

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Brookfield Real Estate Opportunity Fund I has received a $95.5 million first mortgage loan for 64 New York Avenue NE, a 355,000 square-foot office building in Washington D.C.

The first mortgage loan was arranged by Mesa West Capital.

“This investment provides us with an opportunity to make another loan on an institutional quality building with a long-term credit lease to a sponsor with substantial cash equity invested in the asset,” Raphael Fishbach, Mesa West Capital Principal, said in a prepared statement.

The Class A office building was built as a warehouse in 1924. Since acquiring the building in 2005, Brookfield has made significant capital improvements to the building’s tenant spaces, common areas and building systems.

64 New York Avenue NE is located in the NoMa submarket, considered one of the fastest growing areas in the District thanks to more than $3 billion of private investment since 2004.

The property was awarded LEED Gold Certification by the U.S. Green Building Council in 2011 and has earned an Energy Star label every year since 2009.

It is currently 45 percent occupied by the District of Columbia who recently signed a new long-term lease and Brookfield is actively marketing the remaining space.

According to Fishbach, the loan will be used to refinance the existing debt as well as provide for capital costs associated with the recent improvements and District of Columbia lease. In addition, the loan includes a holdback to fund the costs associated with leasing up the remaining vacancy.

Since mid-2010, Mesa West Capital has funded close to $350 million in first-mortgage debt on a variety of Washington, D.C., area commercial real estate assets.