2013 Distinguished Achievement Awards: The Winners (Extended Edition)
- Jun 14, 2013
The July 2013 issue of Commercial Property Executive presented the winners of the third-annual Distinguished Achievement Awards, which honored the brokers, lenders, developers and others that completed some of the most impressive deals, projects and strategies of 2012. We received submissions in eight categories, and our panel of judges (listed below) selected winners in six 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.
Property: One New York Plaza, New York City
Landlord: Brookfield Office Properties
Tenant: Morgan Stanley
Brokers: Barry Gosin, Brian Waterman and Romel Canete of Newmark Grubb Knight Frank represented the tenant; the landlord was represented in house by Jerry Larkin and Duncan McCuaig.
Lease Size: 1.2 million square feet
Property Size: 2.6 million square feet
Lease Length: 17 years
The Story: When Brookfield Office Properties signed Morgan Stanley to the largest lease in New York City since 2008, it achieved a major strategic priority in locking in the occupancy until 2029. Prior to the April 2012 signing, Morgan Stanley had occupied 782,000 square feet subleased from Wells Fargo in 2005 (and formerly occupied by Wachovia) and 34,000 square feet leased directly from Brookfield. The new direct lease expands its occupancy by approximately 337,000 square feet. The property at the southern tip of Manhattan was built in 1970 and renovated in 1995. It was 75.5 percent occupied at the time of the lease.
Judges Praised: The deal kept the building from going dark; it was located downtown, in a “sore spot,” and it had to work for both the owner and the sublessor. With Morgan Stanley now a bank, it is a regulated entity, further complicating negotiations.
Submitted by: Brookfield Office Properties
Property: 350 Mission St., San Francisco
Landlord: Kilroy Realty Corp.
Brokers: Christopher Roeder, David Churton and Ted Davies of Jones Lang LaSalle Inc. represented the landlord; Dan Harvey of Cushman & Wakefield Inc. represented the tenant.
Lease/Property Size: 444,274 square feet
The Story: Within two months of acquiring a development site across from the new Transbay Transit Center in the tightly occupied South Financial District of San Francisco, Kilroy signed salesforce.com to the entire planned 27-story building. Salesforce.com has been establishing a central hub in the high-tech city, having leased 400,000 square feet at 50 Fremont St. early in 2012, subsequently relinquishing plans to build a 2 million-square-foot headquarters campus in Mission Bay, on land it acquired in 2010. Kilroy broke ground in April on the LEED Platinum-designed tower, which incorporates open-plan workspace concepts with high ceilings and plenty of natural light. The building will also feature a 50-foot open-air entry lobby with a 40 by 75 foot electronic media display. The development is estimated to cost $250 million, with an additional $25 million if the company receives entitlements for three more stories.
Judges Praised: Salesforce was going into a campus in China Bay, but Kilroy approached the company with its location, offering to rebuild it to user specifications. Jones Lang LaSalle advised Kilroy to issue REIT shares as a financing alternative, which was cheaper for the tenant and alleviated the need to pursue a loan.
Submitted by: Jones Lang LaSalle Inc.
Best Sale—Single Asset
Property: Essex House, New York City
Seller: Dubai Investment Group
Buyers: Strategic Hotels & Resorts Inc. and KSL Capital Partners L.L.C.
Brokers: Arthur Adler, Jeffrey Davis and Gilda Perez-Alvarado of Jones Lang LaSalle Inc.’s hotel & hospitality group, Americas represented the seller, with Mathew Comfort of the real estate investment banking group leading the acquisition financing team.
Property Type: Hotel
Property Size: 509 hotel rooms, nine condominium units and commercial spaces including food and beverage, meeting rooms and retail space.
Selling Price: $362.3 million, or $712,000 per room
Sale Date: September 2012
Year Construction Completed: 1931
Length of Time to Close: Six months
Lender: Bank of America Merrill Lynch
The Story: In March 2012, Jones Lang LaSalle’s hotel & hospitality group launched a marketing campaign to sell the historic Essex House hotel on behalf of Dubai Investment Group. The Middle Eastern investor had purchased the hotel from Strategic Hotels & Resorts in 2007 and subsequently completed a comprehensive renovation, renaming it the Jumeirah Essex House. The marketing process, already challenging due to financing that was set to mature in September 2012 and the need to deal with a condominium board and labor union, was further complicated when the general manager resigned. Operator Jumeirah Group flew in a representative from Dubai to fill in during the more than 100 inspections of the property by potential investors from around the world, and the brokerage team ultimately lined up Marriott International—which owned the property from 1969 until 1985—to operate it under the JW Marriott flag, the first in New York City, and in August lined up a joint venture of Strategic Hotels and an affiliate of KSL Capital Partners as the buyers. During the six-week time frame that followed, Jones Lang LaSalle sourced a $190 million first mortgage with Bank of America Merrill Lynch.
Judges Praised: The hotel had to be repositioned, and the deal involved a “very independent” the condo board and global players. The seller was unpredictable. The in-place financing was expiring, which made the timing “aggressive,” but the seller has money so it wasn’t crucial. The lack of an operator gave it flexibility. It was under a lot of scrutiny because of the location. Hotel deals are tough, but Jones Lang LaSalle’s hotel group is very capable and so could quickly identify the best buyer.
Submitted by: Jones Lang LaSalle Inc. Hotels & Hospitality Group, Americas
Best Sale—Single Asset
Property: Washington Design & Office Center, Washington, D.C.
Seller: Vornado Realty Trust
Buyer: Affiliates of Hobby Lobby Stores Inc.Brokers: Bill Collins, Paul Collins, Drew Flood, Jud Ryan and James Cassidy of Cassidy Turley represented the seller; Lincoln Property Co. represented the buyer.
Property Size: 811,122 square feet
Selling Price: $250 million
Date of Sale: July 2012
Year Construction Completed: 1920s
The Story: Vornado Realty Trust acquired the Washington Design & Office Center as part of its larger purchase of the Kennedy Family’s Merchandise Mart assets for $625 million in 1998. With the mart business hurt by the national recession, it sold all but the Chicago Merchandise Mart last year, announcing all of the deals in early July, with the Washington properties and the Boston Design Center closing in the third quarter. The Washington Design Center is 78 percent occupied, largely by interior design vendors, while the Washington Office Center is home to the Small Business Administration and other government agencies under long-term leases. The REIT engaged Cassidy Turley to sell both together or separately, viewing the Design Center as a value-add opportunity with the challenge of having been a special-purpose asset with windows on only one side of the building but the benefit of transferable development rights. Together , the buildings comprise an entire block along the Federal Center Metro station, the closest private-sector asset to the U.S. Capitol Building and congressional offices in the city’s Southwest sector. The two buildings sold to the Green family of Oklahoma City, owners of the Hobby Lobby chain of craft stores, who plan to open a national Bible museum in the design center, housing their significant collection of Biblical and other religious manuscripts.
Judges Praised: This was a fire sale of a failing enterprise, but it was complex and offered value add for the buyer.
Submitted by: Cassidy Turley
Property: Amazon Global Headquarters, Seattle
Seller: Vulcan Inc.
Brokers: Kevin Shannon, Todd Tydlaska, Ken White, Tom Pehl, Dwight Newell, Ray Attisha, Reid MacKay, Bill Shanahan, Val Achtemeier and David Stinebaugh of CBRE Group Inc. represented the seller.
Portfolio Size: 1.8 million square feet in 11 buildings on 8.4 acres
Portfolio Composition: Office buildings, including 100,000 square feet of retail (eight restaurants and cafes, a bank branch and a medical clinic)
Occupancy at Time of Sale: 99.6 percent
Selling Price: $1.2 billion, or $641 per square foot
The Story: On Aug. 30, 2012, Vulcan Inc. announced it was listing Amazon’s campus in South Lake Union for sale, with a desire to sell all 11 buildings by year-end. Vulcan, which developed them in six phases (the first in partnership with Schnitzer West) between April 2010 and September 2012, offered them separately, with plans to reinvest the capital into further development of the massive and highly successful South Lake Union neighborhood of Seattle. Among the assets were nine newly constructed buildings ranging from five to 12 stories and two historic rehabs with office lease terms of 14 to 16 years. The buildings all include green features, such as operable windows, rooftop gardens, a green wall, a rain garden, open space and adaptive reuse of the historic buildings, one of which won Historic Seattle’s “Best Rehabilitation” award, and Phases II through V are LEED Gold certified. Amenities include two restaurants operated by Seattle chef Tom Douglas and the neighborhood’s only medical clinic and pharmacy. The properties attracted both national and international interest, but Amazon itself entered into an agreement on Oct. 5 to purchase all of the assets, making a non-refundable deposit of approximately $23 million (which increased to $51 million) to guarantee the year-end closing—and closed the deal in six separate transactions ranging from $614 to $670 per square foot on Dec. 21. The largest office transaction in the United States last year, the deal marked Vulcan’s first sale of completed buildings and two of the phases set local records for price per square foot in the Seattle metro area.
Judges Praised: A huge deal involving multiple buildings in a growth market, the broker and owner realized at some point the greatest value would be in selling to the occupant. Historically, owner-users pay the highest price, and Amazon would be able to capitalize on financial benefits no one else could get.
Submitted by: Vulcan Inc. & CBRE Group Inc.
Property: 31 California Bank Branches
Seller: Large Financial Institution
Buyer: Footprints, Retail Branches, Fortus Property Group and Consolidated-Tomoka
Brokers: Jones Lang LaSalle Inc. represented the seller.
Property Size: 31 buildings totaling 289,330 square feet in Northern and Southern California
Occupancy at Time of Sale: 100 percent leased to large financial institution
Selling Price: $70.4 million, or $243.4 per square foot
Number of Bidders: More than 70, including more than 30 portfolio offers and more than 40 sub-portfolio offers, within six weeks
The Story: A large financial institution, seeking to take advantage of market conditions, hired Jones Lang LaSalle to market 31 properties, primarily in the greater San Francisco and Los Angeles metropolitan areas, with plans to lease them back. The institution was committed to 15-year triple-net leases with no landlord responsibilities, 5 percent rent rate escalations every five years and three five-year renewal options at 95 percent of fair market rent. The brokerage firm launched its marketing campaign in July 2012, including e-marketing, offering flexible bidding and bids on individual assets and geographically oriented sub-portfolios in order to maximize pricing. Bidders ranged from high-net-worth individuals to offshore investors to public and private REITs, and the final cap rates came in in the mid- to high 4 percent range.
Judges Praised: The number of offers achieved in such a short timeframe was impressive, achieved due to the reach of the broker. Bank branches are not a “major food group” and come with issues, but it was a big portfolio, and people are always looking for yields.
Submitted by: Jones Lang LaSalle Inc.
Project: Brookfield Place Perth, Perth, Australia
Owner/Investor/Developer: Brookfield Office Properties
Architect: Hassell, Fitzpatrick & Partners
Project Type: Office and retail
Date Construction Commenced/Completed: August 2008/September 2012
Project Size: 953,000 square feet
Occupancy: 100 percent
The Story: Five years in the making, Brookfield Place, at 125 St.Georges Terrace, is intended as a premier business address helping to bring a “new, vibrant inner-city precinct to life.” The 45-story office tower is fully leased to BHP Billiton, PricewaterhouseCoopers and Barrick Gold, and is attached to four refurbished landmark buildings featuring restaurants, bars and retail (including a fitness center and childcare). Awarded a five-star Green Star — Office Design v2 certified rating by the Green Building Council of Australia, representing “Australian Excellence” in environmentally sustainable design, the tower features energy-efficient heating, ventilation and air-conditioning systems, high-performance glazing and lighting, as well as a greywater system designed to recycle as many as 2,640 gallons of water a day, including rainwater run-off. The elevators have the fastest car speeds in the southern hemisphere, and the floors—which feature side-core construction on the northern side, reducing cooling requirements by absorbing the majority of the solar load while maximizing floor plates and providing a southern view of the Swan River—include zoned lighting with motion sensors and two control panels per floor. The property, with steel frame and concrete construction, also features 100 percent back-up power for tenants, carbon dioxide monitoring in the parking lots, as well as 550 bike spaces, 900 lockers and 55 showers. A second tower is planned for 345,000 square feet on 16 floors.
Judges Praised: An example of the kind of placemaking Brookfield is known for, the project puts Perth on the map with “a neat combination of heritage buildings and new construction.” A nice example of mixed-use and sustainable design, incorporating civic space, 100 percent pre-leased with solid tenants, taking advantage of demand in the area.
Submitted by: Brookfield Office Properties
Project: Devon Energy Center, Oklahoma City
Owners/Investors: Devon World Headquarters L.L.C., a subsidiary of Devon Energy Corp.
Development Manager: Hines
Builder: Holder-Flintco Joint Venture
Architect: Pickard Chilton, design architect; Gensler, programming & interiors; The Office of James Burnett and Murase Associates, landscape architects; Kendall/Heaton Associates Inc., architect of record
Brokers (Sales/Leasing): Cushman & Wakefield Inc., real estate advisor to the owner
Project Type: Office building
Date Construction Commenced/Completed: Oct. 2, 2009/Oct. 18, 2012
Occupancy Date: March 19, 2012
Total Cost of Project: $750 million
Project Size: 1.35 million square feet on 7.52 acres
The Story: Previously located in five separate buildings in Oklahoma City, Devon Energy Corp. sought to consolidate into one space within the city while at the same time benefiting the city itself. It purchased a brownfield site with both surface and structured parking at TK address that had been designated for redevelopment by the Oklahoma City Urban Renewal Authority as a mixed-use Galleria with retail and other uses but languished until Devon’s proposal was accepted in 2008. Devon set goals of providing a robust, modern business platform that would also help attract and retain talent, engage and connect with the surrounding community and help transform the city. It designed the building so as not to “turn its back on any part of the city, thus acknowledging the current urban core north and east while preserving the flexibility to spur development west and south.” With 2.5 acres of publicly accessible parks and plazas, a six-story atrium at the entrance, a five-story podium housing conference and training facilities and re-establishing an east-west block connection along the historic Main Street, a promenade accessing the 81,000 square feet of restaurants and meeting space, plus a 50-story, 850-foot curtain wall and the 1910-built, 110-room Colcord Hotel, it has already attracted a number of business and civic functions. And the company itself has increased its “offers made to acceptances” recruiting rate from its historical mid-70 percent range to more than 90 percent since the building opened. Devon moved more than 2,200 employees into the building through 15 moves over six months. The property, certified LEED-NC Gold v.2, also features innovative water use reductions and use of recycled and regionally sourced building materials. A more than $100 million TIF targeted off-site public improvements, including redevelopment of the 14-acre Myriad Botanical Gardens and extensive streetscape improvements throughout the CBD.
Judges Praised: Brownfield development and a public-private partnership made this an achievement that also went the extra mile for employees.
Submitted by: Devon Energy Corp. & Hines
Best Financial Structure
Property: Palmer House Hilton, Chicago
Financier: JP Morgan
Borrower: Thor Equities
Financing Brokered By: Matt Comfort, Keith Largay, Dave Hendrickson and John Nugent of Jones Lang LaSalle Hotels
Size of Transaction: $365 million
Type of Transaction: Refinancing
Type of Property: Hotel
Size of Property: 1,639 rooms and 57,000 square feet of retail space
The Story: Thor Equities L.L.C. purchased the 140-year-old, 24-story hotel in the heart of the Chicago Loop for $230 million from longtime owner Hilton Hotels Corp. in August 2005, in a transaction brokered by Jones Lang LaSalle. It obtained $362.7 million in loans from Anglo Irish Bank the following year, and in October 2008 completed a $131 million renovation to strengthen the hotel’s operating performance and market positioning. Last year, it refinanced to benefit from low interest rates; the floating-rate financing included a $175 million senior loan from J. P. Morgan Chase Bank N.A. and mezzanine loans from Capital Trust Inc., Macquarie Group, Apollo Global Management L.L.C. and Och-Ziff Capital Management Group L.L.C. It proved to be the biggest brokered financing in the Chicago MSA for the year. (Thor recently put the hotel up for sale.)
Judges Praised: A classic hotel but not 21st century modern, that has long been under renovation, it presented a financing challenge with different levels of finance involving intercreditor agreements. It is in an historic, phenomenal location, and Hilton should have renovated it a long time ago.
Submitted by: Jones Lang LaSalle Inc.
Best Financial Structure
Property: Co-op City, New York City
Financiers: Wells Fargo Multifamily Capital (Cathy Pharis and Alan Wiener)
Borrower: Riverbay Corp.
Transaction Size: $621.5 million
Transaction Type: Refinancing with additional funds for repair and future replacements
Property Type: 15,372 affordable co-op housing units in 35 high-rise buildings and 472 townhouse units, with three strip commercial centers and a power plant
Property Size and Age: 320 acres built between 1956 and 1973
Financing Type: $621.5 million FHA Section 223(f) insured mortgage loan, $55 million credit support from State of New York Mortgage Agency, $15 million credit support from NYC Housing Development Corp.
Loan Length: 35-year fixed-rate, fully amortizing loan
The Story: The existing loan on Co-op City, a Bronx, N.Y., complex housing 55,000 people, had about 14 years remaining on it, with increasing interest rates over its term. Wells Fargo Multifamily Capital obtained a 35-year, fully amortizing, FHA-insured loan at a mortgage rate of 2.4 percent plus 0.45 percent annual Mortgage Insurance Premium to HUD, an interest rate that provided for debt service savings of approximately $150 million over the first 14 years and eliminated the balloon risk inherent in the previous financing. The FHA provided a dedicated team to work throughout the underwriting on the loan, as well as the credit support from the State of New York Mortgage Agency and the NYC Housing Development Corp. The FHA funding marked the first time a cooperative was financed under the program as well as the first time credit support was provided by a combination of the city and state agencies.
Judges Praised: The property offers something a little different for the government agency to finance, given its size and the fact that the agency had not financed co-ops before.
Submitted by: Wells Fargo Multi-Family Capital
Most Innovative Corporate Strategy
Company: CBRE Group Inc.
Nature of Strategy: Site assessment mobile application
The Story: In the process of working together on Sprint Nextel’s 20 million-square-foot real estate portfolio, CBRE and its client have developed a joint Innovation Council to create new solutions to improve their efforts, focusing on using Sprint’s mobile technologies to better deliver CBRE’s real estate services. They focused on facility inspection: Technicians used to document on paper, take pictures with a digital camera, then return to the office and enter the information manually. They developed the Site Assessment Mobile Application to automate the process, incorporating a mobile application for use on a smartphone or tablet PC and an Internet application to aggregate site data, site surveys and photos. The new process reduced individual assessments from four to six hours down to one to two hours, cutting costs for both the buyer and the service provider, reducing unplanned service interruptions and increasing customer satisfactions. And they realized the app could be applied to other real estate functions, as well.
Judges Praised: Property management has lagged behind the digital explosion; CBRE and Sprint have done a service to the industry in creating this app. They will be able to generate better, more real-time information for asset management in a shorter timeframe, and it helps push databases away from Excel spreadsheets. It also is a way to get accountability from employees.
Submitted by: Sprint Nextel & CBRE Sprint Real Estate
Most Innovative Corporate Strategy
Company: Berkadia Commercial Mortgage
Nature of Strategy: Acquisition of Hendricks & Partners
The Story: In mid-2012, Berkadia Commercial Mortgage, of Horsham, Pa., began pursuing possibilities for adding an investment sales division to its national mortgage banking platform, which includes loan servicing, mortgage origination and proprietary lending operations. It identified Phoenix-based Hendricks & Partners, one of the largest multi-family investment sales platforms in the country, with more than 180 apartment professionals in 37 offices nationwide. Determined to complete an acquisition before the new year brought capital gains tax changes, it moved quickly to successfully resolve negotiations and began integrating the new business in time to meet the deadline, closing the deal on Dec. 31. The new business now operates as Hendricks-Berkadia Apartment Real Estate Advisors. Hendricks chairman & CEO Don Hendricks remains as CEO of the new entity and is a member of the Berkadia Executive Committee.
Judges Praised: This deal expands the scope of what Berkadia does.
Submitted by: Berkadia Commercial Mortgage
- Steven Bandolik, director with Deloitte Financial Advisory Services L.L.P.;
- Glenn Brill, managing director of real estate solutions for FTI Consulting;
- Patricia Lancaster-Brown, clinical professor with New York University’s Schack School of Real Estate;
- Arthur Margon, New York partner with Rosen Consulting Group; and
- Ryan Severino, senior economist with REIS Inc.