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COVER STORY, JULY 2007
OFFICE/INDUSTRIAL LEADERS
Developers buck the trend to stand out in the market.
Amy Bigley
As needs and demands for office and industrial space evolve, Resolute Investments, Storm Properties and Watson Land Company respond with unique development strategies, construction plans and product offerings to stay ahead of the market.
Denver Demo: Office Condos
With office condominium development increases in major cities across the country, Resolute Investments is looking to tap into the trend with the development of Wewatta Plaza, a more than $65 million office/retail development in downtown Denver. The office development is the only for-sale condo project and the first high-rise office condo structure in lower downtown Denver.
“This rising trend can be attributed in part to the fact that office condos make smart financial sense for many business owners by providing an opportunity to build equity, appreciation and safeguard against rental increases,” says Gary Rohr, president of the Englewood, Colorado-based company.
When complete in summer 2009, Wewatta Plaza will feature 180,742 square feet of office space and 19,551 square feet of retail space. The site is located adjacent to Union Station, which will be the mass transit hub in the Denver metro area and almost guarantees appreciation of real estate values, Rohr notes.
“The combination of increasing lease rates and long-term appreciation make [Wewatta Plaza] an ideal opportunity for companies to own their offices,” Rohr explains.
With praises from the local governments and municipalities, pre-leasing for the project, which is slated to break ground in second quarter 2008, is well underway and gaining momentum. “[Wewatta Plaza] is a tremendous investment opportunity with a chance to get in on the ground floor of the appreciating Union Station redevelopment area,” Rohr says.
Resolute Investments has 37 percent of its office portfolio in Denver. Additionally, 50 percent of the company’s portfolio is located in the southeast Denver area.
Keeping Industrial in Downtown Los Angeles
Storm Properties, a division of Torrance, California-based Storm Industries, is actively establishing industrial product and rehabbing existing space in downtown Los Angeles in a time when many properties are being converted to other uses.
Last year, the company completed a new two-building speculative distribution development located at Sotello and Ann streets in downtown Los Angeles.
With increasing trade growth coming from the Pacific Rim, there is a high demand for more industrial facilities along the West Coast. By redeveloping the existing manufacturing site into a new speculative distribution facility, the company knew the new project would meet the demands of industrial clients.
“Serving as a brass foundry and the original launch site of Storm Industries, the property has been in the company’s possession since 1932,” explains Kent Phillips, president of Storm Properties. “As the manufacturing industry shifted away from our region, the company decided to clean up the site and build new modern industrial buildings to meet the demand of today’s downtown market.”
The more than 56,700-square-foot project consists of an approximately 35,700-square-foot building and a 21,000-square-foot facility. Ray Duran Construction served as general contractor, RGA Architects provided architectural services and Plontinick Associates served as civil engineers for the project.
As the company’s first for-sale project, which sold before its completion, Storm Properties worked closely with the buyers during the development process to incorporate minor modifications to fit the owner’s specific needs. Solstice Medicine Company acquired the 35,735-square-foot building for nearly $5.5 million, and a private frozen food company purchased the second building for approximately $3.2 million.
Additionally, Storm Properties and its parent company Storm Industries were recently honored by the state’s governor, the California State Senate and the city of Los Angeles for continued efforts and contributions to the local economy by keeping industrial developments in the city with the groundbreaking of Storm Industrial Park, a 10-building industrial park in Torrance, California.
Situated on a 40-acre site, the first phase of the Class A industrial park will consist of two multi-tenant buildings ranging in size from approximately 22,000 to 50,000 square feet. The first phase is slated for completion in spring 2008.
Storm Properties has developed and managed approximately 1 million square feet of industrial space, 65 percent of which can be found in Los Angeles County. The company recently shifted its focus to the Inland Empire market, where 30 percent of its portfolio is currently located.
LEED Industrial Buildings
Carson, California-based Watson Land Company is currently developing Watson Commerce Center Chino, a four-building master-planned industrial center located along Valley Boulevard in Chino, California. The development, which is being built on a former dairy ranch, will comprise approximately 1.27 million square feet of industrial space when complete in March 2008.
Michael Bodlovich, director of marketing and leasing for the company, notes that increased awareness of corporate accountability and responsibility, as well as long-term positive impacts on the environment, influenced Watson’s decision to pursue LEED certification for the facility.
The biggest challenge in the development and construction process has been coping with the time requirements of transforming a producing dairy ranch site into a LEED-certified industrial construction project.
Located in the Chino submarket, the master-planned development will feature a 297,107-square-foot building, a 407,473-square-foot facility, a 265,267-square-foot building and a 301,513-square-foot facility. The first phase of the center, which broke ground in September 2006, is slated for completion this month. The second phase broke in June with completion scheduled for March 2008.
Watson Commerce Center Chino comprises approximately 10 percent of the company’s portfolio. The remainder of Watson’s portfolio consists of approximately 14 million square feet in three master-planned centers – the 350-acre Watson Industrial Center, the 438-acre Dominguez Technology Center and 116-acre Watson Corporate Center — all of which are located in the California’s South Bay area.
Master-ful Development Approach
Master Development Corporation teams with GE Asset Management to take advantage of a stout Southern California industrial market.
Known already for its speed and range in Southern California’s office and industrial market, Master Development Corp. (MDC) has gotten even faster. The bigger green light comes from all the green that GE Asset Management (GEAM) has brought to the developer’s table through their $50 million joint venture established last fall.
“It’s made us a better company,” says Bryan Bentrott, MDC’s executive vice president. “We wanted to move quicker to get the best deals and eliminate three layers of lawyers every time we formed a joint venture.”
The Newport Beach, California-based company accomplished a lot in its first 10 years of existence but wanted to be able to close on more of the best kinds of industrial properties, the types of deals that either went to REITs or “checkbook buyers,” says Bentrott. As of late June, the joint venture has acquired three properties — one in San Diego and two in the Inland Empire — committing roughly 50 percent of the capital. MDC has 2.5 years to use all of the funds.
“We’re continuing to see good opportunities by virtue of the fact that we have the capital, the expertise and a good track record,” says Bentrott.
The developer bought a 17-acre parcel of land in San Diego’s Otay Mesa submarket for $6 million and acquired a 127,800-square-foot industrial building in Corona, California, for $11.5 million. MDC recently closed on a $17.3 million land parcel in Riverside, California. It took only 37 days from the initial property submission to close the transaction.
“Under the old way of doing business, there’s no possible way we could’ve moved that quickly,” says Bentrott.
The $50 million of equity GEAM set aside for MDC’s use is primarily for buying industrial properties but could include some single-story office and business park product. Bentrott reports that the joint venture’s activity will divide evenly between land/ground-up development and value-add acquisitions of existing properties. If a transaction meets a predetermined set of parameters, GEAM is obligated to fund it.
“We went to great lengths to define the parameters of our joint venture so that new transactions could be closed quickly on an all-cash basis,” says Bentrott. “Now we can focus on finding new opportunities and executing the business plan rather than forming individual joint ventures.” The two companies initially met in March 2006 and had agreed on the terms of their partnership by October of last year.
GEAM boosts the wherewithal of an already agile company. MDC was the first developer to build a large speculative warehouse complex in the Inland Empire following Southern California’s market recovery in 1995. MDC has also pioneered the development of small for-sale office/industrial buildings in the Inland Empire and San Diego County from 2000 to 2006. In that time, MDC sold 123 buildings to users ranging from 5,000 to 140,000 square feet.
“Not too many operating development companies have this type of funding mechanism,” says Bentrott. “We have the financial resources of a Grade A pension trust combined with our abilities to see value and look at things across markets.”
— Brian A. Lee |
"Heering" The Call
Heery International more than warms to Southern California market.
Atlanta-based Heery International, the more than 1,000-person, $250 million architecture, interior design, engineering, facility management, program management and construction management firm, had it all covered practically, whether it be commercial real estate service or geographic market. That is with the exception of Southern California, which, most people know, is a pretty big exception.
That all changed in 2005 with Heery’s acquisition of Los Angeles-based project management firm JCM Group and its subsidiary, Long Beach, California-based Facilities Planning & Management (FPM).
“It put Heery in Southern California with a major staff of about 120 people,” says Bob York, a regional manager who came from JCM. “It had an instant presence, it had clients, it had backlogs, it had market contacts, it had relationships that were already established. It would’ve taken years to achieve that.”
Many companies embrace the golden opportunities in the Golden State for the sake of growth itself. Heery was not this way and made sure that corporate cultures as well as business goals were a match before acquiring JCM, which made the initial contact.
“Heery’s very keen on who the people are they’re going to get because they don’t micromanage,” says York. “It has a very congenial, close-knit culture. They focus a lot on people, not just market share. If either party felt that the culture wasn’t right, we would’ve not done the acquisition.”
Heery and JCM had similar values and worked in similar markets — K-12 schools, higher education, government and other large clients.
“Heery wanted to build a much stronger presence in Southern California, something they wanted to do rather quickly because they realized it was a large market,” says York. “We were a very opportune firm at that moment.”
While the JCM acquisition allowed it to be an immediate player in Southern California, Heery was able to leverage its national connections and resources for its new regional office. This includes its major consultant role for the GSA, military and other federal government entities. Cultivating client relationships in the industry is critical.
“We’re selling management, advice, intelligence and our staff,” says York. “We have no product that we’re selling. It’s all about the people.”
A major new initiative for the company is construction management at risk and design/build. Heery has doubled its capacity for this kind of work since the time of the merger, says York. This effort is aided by the general trend in Southern California of the public sector practicing best-value selection on contracts rather than low-dollar bidding.
“At-risk, design-build business, that’s going to be a major thrust for us in Southern California,” says York. “We were not a contracting firm before. Heery has given that to us. We’ve really increased our ability to market our services. With Heery, we’re able to go for larger programs.”
Heery recently handled construction management services for three health sciences laboratory projects at UCLA. The firm’s intensive project analysis helped keep change orders on the Neuroscience Research Building to within 3 percent of the final construction cost.
As program manager for Ventura County Community College District’s Measure S program, which is funded by a $356.3 million bond passed by Ventura County voters in 2002, Heery has already completed three major projects: a $27.7 million Learning Resource Center at Ventura College; a $19.8 million Learning Resources /Telecommunications Center at Moorpark College; and a $8.8 million, stand-alone child development center, also at Moorpark College. An ongoing project is the $26.3 million student services facility at Oxnard College, which broke ground in October 2006.
— Brian A. Lee |
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