2012 Distinguished Achievement Awards: The Winners (Extended Edition)
- Jun 27, 2012
The 2012 issue of Commercial Property Executive presented the winners of the second-annual Distinguished Achievement Awards, which honored the brokers, lenders, developers and others that completed some of the most impressive deals, projects and strategies of 2011. We received submissions in six categories, and our panel of judges (listed below) selected winners in five of them. What follows are extended details of those award-winning entries.
You may also want to view:
- The presentation in the digital edition;
- A slideshow featuring photos, aerial views, floor plans and other representations of the winning properties; and
- A video featuring the observations of the judges on what these deals signify about today’s real estate market.
Tenant: Conde Nast
Property: One World Trade Center, New York, N.Y.
Landlords: The Port Authority of New York and New Jersey and The Durst Organization
Brokers: Mary Ann Tighe and Gregory Tosko of CBRE Group Inc. for the tenant; Tara Stacom and Alan Stein of Cushman & Wakefield Inc. for the landlords
Size of Lease: 1,008,012 square feet
Size of Property: 2.6 million square feet
The Story: Magazine publisher Conde Nast led the market in 1999 when it moved its headquarters to The Durst Organization’s new 4 Times Square tower in Manhattan’s Times Square. Nowhere near its lease expiration but seeking the best place to establish long-term occupancy and consolidate a number of offices into one, the company and its real estate brokers at CBRE Group Inc. started a search throughout the city for a contiguous 1 million-square-foot block of space. Rumors that it was considering the new World Trade Center site broke a year before it signed the lease at One World Trade Center in May 2011. The decision wasn’t easy, as the property is still under construction, there were negative perceptions due to previous political and construction delays at the site, there was some reported resistance on the part of staff members to moving to the high-profile spot downtown and Conde Nast still had five and a half years left on its lease. Ultimately, though, One World Trade Center owner the Port Authority of New York and New Jersey agreed to assume its remaining obligation at 4 Times Square and the two sides agreed to manageable occupancy costs, plus rigorous access provisions and operating guidelines designed to provide security while ensuring access for important visitors.
Judges Praised: Downtown always has a stigma relative to Midtown, and this is not a traditional downtown tenant. It makes a big statement in the post-9/11 market.
Submitted by: CBRE Group Inc.
Property: 301 W. Bay St., Jacksonville, Fla. (currently AT&T Tower; to be renamed EverBank Center)
Landlord: Elad National Realty
Brokers: Grubb & Ellis Co./Phoenix Realty Group for the landlord; CBRE Group Inc. for the tenant.
Size of Lease: 269,000 square feet
Size of Property: 1 million square feet
Rental Range in Building: $16.50-$17.50 per foot, full service (rental rate for lease not available, but transaction is valued in excess of $45 million)
Length of Lease: 10 years
The Story: The largest lease in Florida since 2007 and the largest in Jacksonville’s Downtown in more than two decades, EverBank’s assumption of 269,000 square feet at what has been known as AT&T Tower was no small task. The second-largest bank in Northeast Florida, it was seeking to consolidate its offices and had ruled a build-to-suit unfeasible. Downtown offered the best alternatives, but meant a big change for employees accustomed to a suburban campus; it also presented challenges in the form of parking options and $26.5 million in relocation costs. CBRE rep Oliver Barakat identified the tower as the best location and worked with the owner, the city and the state on incentives that ultimately included exclusive top-of-building signage and other signage rights, parking, a variety of flexible lease options and amenity upgrades; a city council economic development agreement to relocate 1,000 jobs to Downtown from the Southside (1,500 are actually relocating) and create 200 new full-time jobs (the total is actually 250) in exchange for $420,000 from the city and a $1.7 million refund from the state, plus $300,000 in training funds. The city also agreed to provide $2.8 million to help offset moving costs. The deal hit a curve when the building went into special servicing after the letter of intent was signed, but the lease was signed on Dec. 19, 2011, with lenders approvals and tax incentives finalized in February 2012.
Judges Praised: Florida tends to be one of the worst markets in the country. The collaboration between the city, state, tenant and landlord was impressive, especially given the obstacle presented by special servicing. The deal brings a lot of benefits to Jacksonville.
Submitted by: CBRE Group Inc.
Best Sale—Single Asset
Property: 1400 Smith St., Houston
Seller: Brookfield Office Properties
Brokers: Holliday Fenoglio Fowler L.P. represented the seller
Size of Property: 1.3 million square feet
Occupancy at Time of Sale: 100 percent
Selling Price: $340 million/$268 per square foot
Date of Sale: June 2011
Year Construction Completed: 1983
The Story: In 2006, Brookfield acquired the 50-story Four Allen Center, a vacant property that had been the headquarters of Enron Corp., for about $120 million in joint venture with The Blackstone Group. The October sale announcement was simultaneous with that of its lease-up to Chevron USA Inc., at the time the largest lease in North America in more than five years. Earlier that year, Chevron had leased 465,000 square feet in Brookfield’s Continental Center I, next door at 1600 Smith St. Five years later, Brookfield sold the office tower to Chevron for $340 million as part of its ongoing strategy to recycle capital from mature assets into growth opportunities. It also renewed Chevron in 311,000 square feet at 1600 Smith St. for seven years.
Judges Praised: The sale was impressive, taking a building that was empty at purchase to 100 percent full at sale, and buying at $120 million but selling at $340 million five years later.
Submitted by: Brookfield Office Properties
Property: 56 buildings in the Metropolitan Washington, D.C., area
Buyers: AREA Property Partners and the Adler Group
Seller: Washington Real Estate Investment Trust
Brokers: Cassidy Turley represented the sellers
Size of Portfolio: 3.1 million square feet
Make-up of Portfolio: Office, industrial/flex and warehouse facilities
Occupancy at Time of Sale: 80 percent
Selling Price: $350 million/$113 per square foot
The Story: Washington Real Estate Investment Trust assumed a colossal effort in selling off 56 buildings totaling 3.1 million square feet and ranging from office to industrial/flex to warehouse in locations throughout Virginia and Maryland last year. The properties are all prominently situated along major highways, with a number adjacent to Washington Dulles International Airport, and were leased to 191 tenants that included GE Healthcare, MedImmune, Raytheon, L-3 Communications, ITT Educational Services and American Honda Motor Co. There was also a sizeable redevelopment component, given changes in neighborhoods and resultant rezoning or potential for it. Cassidy Turley maximized the sale potential by dividing up the assets into four regions, with a flyer directing investors to a Web site including an interactive aerial overview and the ability to obtain more detailed information on each of the properties. It also underwrote each asset, providing an ARGUS model, rent roll, budget and loan summary for each, and took over leasing so it could stay on top of market leasing activity. The offering memorandum totaled 345 pages and was distributed to 150 potential buyers. Nineteen pursued tours and meetings, and ultimately nine made an offer. The deal closed as five separate transactions, with the first three taking 127 days to close, the fourth 158 days and the fifth 187 days.
Judges Praised: The deal shows a lot of effort and creativity.
Submitted by: Cassidy Turley
Property: Roche Palo Alto Campus at 3431 Hillview Ave. in Palo Alto, Calif.
Brokers: Joe Hamilton, Ben Stern, Randy Scott and Erik Doyle of Cornish & Carey Commercial Newmark Knight Frank represented the seller
Size of Property: 966,086 square feet on nearly 70 acres
Occupancy at Time of Sale: Vacant
Selling Price: $225 million, or $225.88 per square foot
Date of Sale: June 2011
Number of Bidders: Eight
Time to Close: About one year
The Story: After Roche purchased Genentech in March 2009, it decided its existing life science campus space was redundant, and in June 2010 it retained Cornish & Carey Commercial Newmark Knight Frank to sell the property. The sale was complicated by the fact that the campus constituted 10 percent of the Stanford Research Park and subject to a Stanford (University?) ground lease with an early termination option in June 2024. Furthermore, Cornish & Carey sought market rates in a market where most buyers sought a discount, the age and degree of update on the 17 office and laboratory buildings involved varied widely, and the parking ratio suited the current use but would not support an office conversion. The brokers identified VMware from a pool of eight potential buyers, attracted by its existing presence in the Roche campus, which was adjacent to its headquarters, and growth projections. Furthermore, it already paid a ground lease to Stanford for the headquarters. But the property, recognized as a leader in sustainability, had so many interested buyers, the price rose almost 70 percent during the course of bidding, reaching the initial valuation. The brokers negotiated a creative restructuring of the ground lease and secured rights for additional development.
Judges Praised: This is a good market but has challenges. The price paid was realatively attractive. Life science even in California is not an easy thing to sell. It was completely vacant, a secondary property type but a decent price. There was a lot of hair on the deal.
Submitted by: Cornish & Carey Newmark Knight Frank
Project: Hess Tower, Houston
Project Type: Office tower
Owners/Investors: Trammell Crow Co. and Principal Real Estate Investors
Developer: Trammell Crow Co.
Broker: CBRE Group Inc.
Date Construction Completed: June 2011
Project Size: 844,763 square feet on 2.15 acres
Percent of Project Leased: 100 percent
The Story: Trammell Crow Co. and venture partner Principal Real Estate Investors purchased the site, then a parking lot, in March 2007, breaking ground on what was a speculative office tower called Discovery Tower in March 2008. The first pre-certified LEED Gold office building to be constructed in Houston’s CBD, it attracted global energy firm Hess Corp., which signed a long-term lease for the entire building in late November. Design modifications were made to accommodate the new tenant, including increased floor-to-floor heights on three stories, with additional elevator stops, restrooms and fire stairways required, and the building was completed in June 2011—with a LEED Platinum certification, ahead of schedule and under budget.
Additional features include a floor-plate design that accommodates both open- and closed-office layouts, with full-height high-efficiency glass that is notched at the corners to maximize daylight in interior spaces, create broader views and reduce heat gain at the perimeter. Interiors include light harvesting fixtures and motorized window shades. It is about 20 percent more energy efficient than a typical office building, with a highly efficient energy recovery unit, high-efficiency centrifugal chillers, a plumbing system that is 40 percent more efficient than traditional buildings, the ability to harvest air conditioning condensate for landscaping irrigation, a green roof on the entry pavilion and high-insulation roof at the top, and other energy-saving features.
The property sits on the eastern end of the CBD and was designed to extend the pedestrian corridor from the new 12-acre Discovery Green, Houston’s new Central Park, to the building. It is surrounded by retail, entertainment and hospitality, including the new Toyota Center sports facility, which houses three professional teams, Minute Maid Park and the new soccer stadium currently under construction. It is also within walking distance of the George R. Brown Convention Center and an existing METRORail station, with new lines locating additional stations nearby soon.
Judges Praised: The developer started the property speculatively—a very bold decision to build an unleased building in that neighborhood that had an opportunity to support what the neighborhood was trying to do. Was able to lease it to Hess, changing plans and streamlining the lower floors to benefit the building, which was planned for LEED Gold but came in Platinum and was achieved in the midst of a tough economy. It also had a big impact on downtown Houston and given that it wasn’t on the beaten track was a little bit of a pioneering deal for the area.
Submitted by: Trammell Crow Co. and Principal Real Estate Investors
Project: Baylor Charles A. Sammons Cancer Center at Dallas
Project Type: Medical
Owners/Investors: Duke Realty and Northwestern Mutual Insurance
Developer: Duke Realty
Builder: Medco Construction
Architect: Perkins + Will
Brokers/Sales/Leasing: Duke Realty
Date Construction Completed: February 2011
Occupancy Rate: 95 percent
Total Cost of Project: $152 million
Project Size: 459,717 square feet on 2.25 acres
The Story: The largest outpatient cancer treatment center in North Texas, the Charles A. Sammons Cancer Center at Dallas is the result of expansion by Baylor Health Care System. The 10-story facility is LEED Gold certified and includes physician space, an oncology research accommodation, a transplant center and conference facilities, along with a radiation wing including four linear accelerators, diagnostic imaging, an outpatient clinic and urgent care center, along with a number of other departments. It includes 54 surface parking space and two levels of underground parking, along with an adjacent garage. The property took two years to construct, creating 400 to 500 jobs at its peak and made the more challenging because of its semicircular design; its sustainable features include natural lighting as well as fountains and gardens. It is connected to the main hospital via an enclosed walkway, and is tied into the city.
Judges Praised: A major benefit for the community and the patients. Medical deals are more difficult than standard office deals, requiring a lot more collaboration between the developers and industry experts—especially oncology facilities.
Submitted by: Duke Realty
Most Creative Repositioning Plan
Property: One Front St., San Francisco
Property Type: Office
Property Size: 638,768 square feet/ 36 floors
Broker/Manager: Jones Lang LaSalle Inc.
Type of Effort: New marketing and leasing plan
Duration of Repositioning Efforts: September 2010 through end of 2011
Occupancy Before/After Repositioning: 78 percent/95 percent
The Story: When Jones Lang LaSalle Inc.’s Wes Powell, Christopher Roeder and Ted Davies assumed brokerage and management responsibilities for One Front St., the Class A building in San Francisco’s financial district was just 78 percent leased, and some spaces had been vacant for as long as 10 years. However, the team believed a new marketing and leasing plan would turn the property around. They set up a show floor with power-blasted floors, tucked-away wiring, some strip lighting and columns covered with sheet rock, along with remodeled bathrooms and a glass-walled conference room. They incorporated a graphic display featuring large-format wall, floor and column images that also included information about the building, including its focus on sustainability, amenities and prominent location. The building’s features include terraces on the top four floors with views of the city and bay, valet parking, floor plan flexibility and a variety of fiber providers.
Judges Praised: The location is good—the owners didn’t know how to market the building, how to make the space attractive. The broker knew how to do it and didn’t do it just by cutting rents. They put a lot of effort into changing the situation. It shows good thinking.
Submitted by: Jones Lang LaSalle Inc.
Best Financial Structure
Property: 470 Vanderbilt Ave., Brooklyn, N.Y.
Financiers: Lance Capital L.L.C. (arranger) and CGA Capital Corp. (provider)
Borrower Group: GFI Development, Starwood Capital and The Carlyle Group
Size of Transaction: $44 million
Type of Transaction: Tenant improvement financing
Type of Property: Office
Size and Age of Property: 400,000 square feet in a 650,000-square-foot, 80-year-old building
Loan-to-Cost: 100 percent
Rate: Less than 4.25 percent
Length of Loan: Seven years
Time to Close: 30 days
The Story: The Human Resources Administration (HRA) of the city of New York signed a 400,000-square-foot, 20-year lease, but the building required significant renovation as well as tenant improvements, including more than $100 million in construction work and a major recapitalization including a $130 million senior loan syndication. Lance Capital arranged and CGA provided $44 million on a non-recourse basis to the building’s owners, backed primarily by a portion of HRA’s rent and not by the building. CGA issued bonds tied to the loan and privately placed with institutional investors; while unrated, the bonds benefited from the city’s double-A rating. The TI loan covered 100 percent of tenant improvements, leasing commissions and all transaction costs, allowing HRA to allocate money it would have otherwise spent on its leased space to more pressing needs and to benefit from an estimated 70 percent federal reimbursement of the rental expense. The lease, a new equity investment and the new senior loan syndicate were all triggered by the TI loan and closed together in September 2011. Lance and CGA are working on other projects across the country that will benefit from this type of TI financing arrangement.
Judges Praised: Precedent setting, very complicated, extremely difficult politically and completed very quickly.
Submitted by: Lance Capital and CGA Capital
Best Financial Structure
Property: The Point DC Portfolio (formerly known as The Magazine Portfolio), eight properties located in the Virginia and Maryland suburbs of Washington, D.C.
Financiers: Freddie Mac, Centerline Capital Group and Principal Financial Group
Borrowers: Control of the properties rests with Magazine Investors L.L.C., a joint venture of two funds families: DP Portfolio Investors L.L.C., a joint venture of funds created by Pantzer Properties and Dune Real Estate Partners, and preferred equity interests from two Malkin Properties funds plus the State Bureau of Administration of Florida, which manages the assets of the Florida Retirement System. In all, there were 43 borrower entities.
Size of Transaction: $328,680,000
Type of Transaction: Freddie Mac preferred equity structure
Type of Property: Multi-family
Size and Age of Property: 2,580 units in eight buildings, built between 1974 and 2000
Loan Terms: Five loans: five years each, three years interest only, 1.3 DSCR, approximately 70 percent LTV, 3.41 percent rate non-recourse; three loans: seven years, five years interest only, 1.25 DSCR, about 80 percent LTV, 4.13 percent rate, non-recourse, all early rate lock.
Time to Close: 60 days
The Story: Over the course of 60 days, Centerline Capital Group closed a Freddie Mac-financed preferred equity structure that paid off the single note securing eight different properties purchased in 2011, allowing each of the properties to be financed individually so they could be sold off independently. The rate was below the current financing and extended the terms of the loans to meet investors’ holding periods. The complex deal was Centerline’s largest last year and among the largest group of loans financed by Freddie Mac.
Judges Praised: The deal eliminated a lot of things the existing debt had but gave the borrower more flexibility. It entailed a lot of smart people.
Submitted by: Centerline Capital Group
- Jay Epstien, partner with DLA Piper, chair of its U.S. real estate practice and co-chair of its global real estate practice;
- Josh Herrenkohl, real estate advisory investment services leader with Ernst & Young L.L.P.;
- Scot Hileman, director with Deloitte Financial Advisory Services L.L.P.;
- Ryan Severino, senior economist with REIS Inc.; and
- Carl Weisbrod, clinical professor and academic chair of global real estate in New York University’s Schack Institute of Real Estate and former president of Trinity Real Estate.