ConAgra, Mack-Cali render Orange County en fuego Boston-based Winthrop Management closed 1999 with a 10-year, 400,000 sq. ft. lease for Omaha, Neb.-based ConAgra Grocery Products Co. in Park Place Office Campus in Irvine, Calif. ConAgra will relocate approximately 800 employees from Fullerton into the mixed-use office campus.
ConAgra will occupy the entire four-story 3353 Michelson building, two floors at 3355 Michelson as well as 100,000 sq. ft. in 3337 Michelson. Move-in is scheduled to begin in July.
Also in Orange County, El Segundo, Calif.-based Summit Commercial Properties and Cranford, N.J.-based Mack-Cali Realty Corp. plan to build Stadium Gateway, a $40 million, Class-A office building in Anaheim's new sports and entertainment district adjacent to Edison International Field. Construction of the six-story, 250,000 sq. ft. structure in Anaheim's Tri-Freeway submarket is scheduled to begin this quarter, with completion slated for second-quarter 2001. The Tri-Freeway area is slated for $1.1 billion in transportation improvements that should be completed by mid-2001.
Has the millennium's high-tech fever hit The Big Apple? As it should, New York's Silicon Alley continues to draw high-tech tenants, while other submarkets thrive as a number of properties changed hands near the end of 1999. New York-based RFR Holdings LLC, in partnership with GREIO, a division of New York-based Citigroup Investments, led the way on the acquisitions front with the purchase of 757 Third Street for $102 million. RFR and GREIO acquired the 27-story, 460,000 sq. ft. Class-A building from New York-based Emmes & Co. LLC.
Built in 1973 and renovated several times since, 757 Third Avenue is 96% leased. The building will be managed by RFR Realty LLC, which recently sold 830 Third Avenue for $42 million but jumped at the opportunity to add another Third Avenue asset, according to RFR principal Aby Rosen.
Also in Manhattan, The Praedium Group (an affiliate of New York-based Credit Suisse First Boston) and locally-based Taconic Investment Partners sold 50 Broadway to Newport Beach, Calif.-based Koll-Bren Realty Advisors for approximately $46 million. Built in 1927, 50 Broadway is a 37-story, 342,000 sq. ft. office building in New York's financial district. Since acquiring the building in 1997, the Praedium Group and Taconic changed the tenant base by luring high-tech, e-commerce, non-profit and entertainment tenants. The building is 90% leased.
In a deal arranged by Chicago-based Jones Lang LaSalle, Taconic and New York-based Blackacre Capital Management LLC have also sold 100 William Street in lower Manhattan for approximately $50 million. A partnership between Lighthouse Real Estate Ventures Inc. and Cargill Financial Services, both of New York, acquired the 21-story, 372,893 sq. ft. building, which was built in 1973 and served as the headquarters for Chubb Insurance Co. Taconic/Blackacre purchased 100 William St. in 1998.
Down the street from 50 Broadway, Stamford, Conn.-based GE Capital Real Estate closed a $49 million, 10-year fixed-rate first-mortgage conduit loan with 45 Broadway LLC, an affiliate of New York-based Schron & Co., for the acqui sition of 45 Broadway, a 368,471 sq. ft. Class-A office building.
And in the Silicon Alley district, New York-based Colliers ABR has brokered an $85 million, 122,000 sq. ft., 15-year net lease for the entire 105 East 17th Street building on behalf of San Francisco-based USWeb/CKS. New York-based Insignia/ESG represented the building's owner, The Related Cos., New York.
USWeb/CKS plans to relocate more than 450 of its 600 New York employees - presently located in five Manhattan buildings - into its new 122,000 sq. ft. Union Square facilities next spring. 105 East 17th Street is located next to the building that Related plans to redevelop into a 'W' Hotel. According to Paul Mas of Colliers ABR, 105 E. 17th was the last large block of immediately available space in the Silicon Alley district.
Colliers ABR also negotiated a $4.5 million (net present value) tax incentive package with the City and the state of New York on behalf of USWeb/CKS due to the company's planned growth in the area during the next 15 years.
Cornerstone closes lease deal with U.S. Bancorp New York-based Cornerstone Properties Inc. has signed U.S. Bancorp to a 675,000 sq. ft. lease at Cornerstone's Minneapolis development, U.S. Bancorp Center, through 2014. U.S. Bancorp will relocate its corporate headquarters to the 800 Nicollet Mall building beginning in June and eventually will occupy 20 floors with about 2,400 employees. Cornerstone will acquire the 30-story, 929,000 sq. ft. building from Minneapolis-based Ryan Cos. upon completion, which is slated for sometime this quarter.
In addition to the U.S. Bancorp lease, Cornerstone has executed leases for a McCormick Schmick's seafood restaurant and law firm McGrann, Shea, Franzen, Carnival, Straughn & Lamb, bringing the development's prelease commitment to 75% occupancy.
Opus West, TMW begin San Jose spec development Phoenix-based Opus West Corp., in a joint venture with Atlanta-based TMW Real Estate Group, has broken ground on Opus Center West San Jose in downtown San Jose, Calif. Located at 225 W. Santa Clara St., the 350,000 sq. ft., 16-story office building will include 15,000 sq. ft. of retail space above three levels of parking. According to Opus West, the development - set for completion in June 2001 - is the area's first spec Class-A office project in nearly a decade.
Downtown San Jose vacancy rates around 2% and no new office development in nearly a decade made the decision to proceed with Opus Center San Jose relatively easy. "We're ahead of everyone else by at least a year," says John Greer, senior vice president at Opus West Corp. "It's a really dynamic real estate market."
C&W moves 1M sq. ft. of suburban Chicago office space New York-based Cushman & Wakefield has arranged two suburban Chicago transactions worth more than $125 million. First, New York-based Teachers Insurance and Annuity Association acquired four office properties with more than 632,000 sq. ft. from Chicago-based LaSalle Investment Management for more than $55 million.
The four properties include Woodfield Executive Plaza in Schaumburg, Ill.; Crossroads Center in Rolling Meadows, Ill.; Boulevard 40 in Northbrook, Ill.; and Howard O'Hare Business Court in Des Plaines, Ill. The portfolio is 96.7% leased.
In Oak Brook, Ill., The RREEF Funds, Chicago, has acquired Mid America Plaza from Lend Lease, which sold the property on behalf of a commingled investment account of pension fund clients. RREEF reportedly paid more than $73 million on behalf of a pension fund client for the 407,886 sq. ft., twin-tower complex.
Lend Lease sells; Cousins /Myers ready to build In a tight San Francisco market, Atlanta-based Cousins Properties Inc. and San Francisco-based Myers Development Co. have acquired the One Second Street development site from Ft. Lauderdale, Fla.-based Jaymont Properties for $22 million, while Atlanta-based Lend Lease Real Estate Investments Inc. has sold 201 Spear Street on behalf of a commingled investment account comprised of pension fund clients.
Cousins/Meyers 25,776 sq. ft. property is located on Second Street between Market and Mission streets and is fully entitled for 373,500 sq. ft. rentable sq. ft. of office and retail development. Discussions are underway with a major anchor tenant, and the project will begin construction once the venture's preleasing requirements are met. The project will be owned by Cousins/Myers II LLC, a venture between Cousins and Myers Bay Area Co. LLC.
The planned 25-story, Class-A office building is expected to cost approximately $113 million to develop. Cousins Properties will jointly develop the site and provide building management services upon completion, while Los Angeles-based CB Richard Ellis will provide leasing services.
In a deal brokered by New York-based Sonnenblick-Goldman Co., Lend Lease sold 201 Spear Street for approximately $62 million to Springfield, Mass.-based MassMutual Insurance Co. Built in 1985, the 18-story, 231,500 sq. ft. building is fully leased. The property is located in the SOMA submarket.
Washington, D.C., area continues to thrive With low vacancy rates and robust absorption, Washington, D.C., and its Virginia and Maryland suburbs continue to be a center of hot real estate deals. First, Houston-based L.J. Melody & Co. has arranged $130 million in fixed-rate financing for 1001 Pennsylvania Avenue office building in the District. New York State Teacher's Retirement Systems provided the funding through L.J. Melody's Newport Beach, Calif., office on behalf of Lincoln Square Corp., a Delaware corporation that is advised by National Office Partners LP, a partnership between Houston-based Hines' and CalPERS, and Dallas-based L&B Realty Advisors Inc.
The 14-story, Class-A office building is located on Pennsylvania Avenue between the Capitol and the White House. The building contains approximately 712,000 sq. ft. of office space and 43,000 sq. ft. of retail space atop a three-level parking garage.
In Arlington, Va., CB Richard Ellis brokered the sale of Lincoln Place, a 500,000 sq. ft., two-building office complex in Pentagon City. On behalf of the California State Teacher's Retirement System, Lend Lease reportedly paid $160 million to Lehndorff/La Solana, a partnership between Japan-based Sumitomo Realty & Development and L&B Realty Advisors.
Near Baltimore-Washington International Airport, Bala Cynwyd, Pa.-based Corporate Office Properties Trust acquired a two-building, 200,000 sq. ft. office portfolio from Dallas-based Prentiss Properties Trust for $25.8 million. The deal includes an adjacent 6.4 acre site that can support the construction of a four-story, 100,000 sq. ft. office building, which Corporate Office Properties plans to build next year. Deutsche Banc Alex.Brown funded the acquisition through Corporate Office Properties Trust's existing revolving credit facility. The suburban Maryland office buildings are 98% leased.
As part of a related like-kind exchange, Prentiss acquired 123 N. Wacker Drive in Chicago for $87.25 million. The 535,549 sq. ft. Chicago CBD building is 97% leased to AON Corp., which will vacate the property in September 2001.
Back in the Virginia suburbs, New York-based Tishman Speyer Properties is constructing two speculative properties in Woodland Park office park on the Dulles Access Toll Road in Herndon. Plaza Ridge I and II each will have approximately 156,000 rentable sq. ft. of Class-A office space. The two six-story buildings will deliver in November 2000. With Plaza Ridge I and II, Tishman Speyer will have more than 1.4 million sq. ft. of office space completed or under development in Woodland Park. The park will eventually include nearly 4 million sq. ft. of office space, a 150-room Embassy Suites Hotel, 400 multi-family units and a 150-child day care center.
First Evergreen acquires properties suburban Philly and N.J. Roseland, N.J.-based First Evergreen has acquired a portfolio of five Class-A office buildings from Wayne, Pa.-based O'Neill Properties for $60 million. Cushman & Wakefield represented O'Neill in the transaction.
The 422,263 sq. ft. portfolio includes 10015 and 1005 Virginia Avenue in Fort Washington, Pa.; 212 Church Road in Lansdale, Pa.; 70-72 East Swedesford in Malvern, Pa.; and 275 Phillips Boulevard in Princeton, N.J. The portfolio is 95% leased.
Meet the Parkers So it's another frigid January, and it's hard not to think about balmier climes, Southern California in particular. And when Southern California comes to mind, several big family names pop up - Koll and Irvine, for example. But this month we'll take a look at Parker Partners of Aliso Viejo, Calif., where father and son John and Russ Parker serve as chairman and president, respectively.
With equity partner Cigna, Parker Partners plans to break ground in April on the third and fourth phases of its Summit development in Aliso Viejo. With a cost of about $190 million, the third and fourth phases consist of more than 1 million sq. ft. of office space, and will bring Summit's total to 1.7 million sq. ft. of office space on 70 acres. Parker started Summit in 1997, and it is now home to a number of high-tech, high-growth companies, notably: QLogic, which recently moved into Summit taking 165,000 sq. ft. with an option to increase to 210,000 sq. ft.; Buy.Com, which recently jumped from a 53,000 sq. ft. commitment to 75,000 sq. ft.; and NowDocs.com, which jumped from 1,700 sq. ft. to 7,500 sq. ft. in the past six months.
How are they putting together these deals? Parker Partners uses a number of different methods - letters of credit tied to the tenant's net worth that also may require a certain amount of rent upfront, bonded credit and lease bonds and letters of credit from a parent company. Stock options are an appealing alternative, but potential tenants aren't always willing to give them up.
"The weaker the tenant, the more they want to give you the warrants and options," says John Parker. "The stronger ones you won't get it from, but we're looking for those opportunities. You have to consider it as a higher risk and higher reward.
Adds Russ Parker, "The collateralization has changed, but also the sophistication of the tenants has changed. They're not surprised by us saying we need additional collateralization."
Of course, high-tech tenants demand high-tech amenities such as high bandwidth and broadband capabilities. But Parker further met tenants' demands for daycare, banking, printing, dry cleaning and destination restaurants where tenants could dine with their clients. Summit's size and those amenities give it a clear advantage over many Southern California competitors, especially those with one-off buildings and older developments.
"It's a fundamental change that's taking place," says John Parker. "When we put this together, we said we had to have 1 million sq. ft., and when we get finished here we'll have 1.7 million sq. ft. One of the reasons for that is that the one-off building just cannot compete. We can supply a much higher level of service at a better price.
"More and more, tenants, particularly these high-growth companies, are aware of that," he adds. "A significant trend that you'll see is more of these suburban campuses, and that's what we're out seeking right now. It's hard to find because you have so many ingredients, but I think you're going to see more of those."
"We've actually had requirements in the 100,000 sq. ft.-plus range where our one-off competition didn't even get a proposal even though they may have had 150,000 sq. ft. to accommodate a 100,000 sq. ft. tenant," says Russ Parker. "Tenants don't view that as a site that offers them that future expandability and flexibility, so they're not interested. Giving them a place to accommodate that explosive growth, that flexibility, as well as the flexibility the campus provides with expanded hours and other amenities and services, really seems to have a final appeal."
Parker Partners also has allowed for flexible leases for companies that really don't know who or how big they are going to be in 5 to 10 years. That means higher rents as tenant improvements are passed on over a shorter period of time, but tenants seem to be willing to pay.
"We're able to accommodate that uncertainty of what their size and tenancy is going to be," says Russ Parker. "That plays a pretty big role with some of these guys. They don't want to have that on their books - some giant real estate number."
Adds John Parker, "Some of them may end up being bought out by another firm, and then the whole office needs changes. They need a way out," he says. "It's so important for us to design it that, when they move out, we have something that will be attractive to the next group."