New York-based Allianz Real Estate and Columbia Property Trust of Atlanta have formed a joint venture focused on acquiring and managing Class A office properties in select markets across the U.S. As part of the newly created initiative, the two firms have contributed three unencumbered properties with a combined gross asset value of $1.26 billion, located in San Francisco and Manhattan. The partnership plans to pursue additional prime office assets in top-tier locations.
Allianz contributed one of its Manhattan office properties to the joint venture. Valued at $220 million, 114 Fifth Ave. is a 352,000-square-foot office building that the company acquired back in 2015. Located in the bustling Flatiron District in Manhattan’s Midtown South, the 19-story property recently underwent a $45 million renovation effort and is fully leased to high-profile tenants such as MasterCard, First Look Media and Acxiom, according to Yardi Matrix data. The LEED Gold-certified tower includes 23,500 square feet of retail space and is managed by L&L Holding Co., which also holds a 1% stake in the property. As a result of the new venture, Allianz and Columbia each owns 49.5% of the Fifth Avenue property, with L&L Holding retaining its partnership stake. Allianz was advised by Cushman & Wakefield in the negotiations.
“In addition to an alignment of our investment strategies, the combination of our highly-experienced and knowledgeable teams of investment and asset management professionals will support growth in the portfolio of our joint investments over time,” Christoph Donner, CEO at Allianz Real Estate of America, said in a statement.
Columbia Property Trust contributed two prime Bay Area assets to the new joint venture: University Circle, a 451,000-square-foot Palo Alto office complex valued at $540 million, and 333 Market St., a 657,000-square-foot office tower in San Francisco’s Financial District, valued at $500 million. The Palo Alto property was acquired by Columbia in 2005, while 333 Market St. was purchased back in 2012. Columbia now retains a 77.5% stake in the two assets, with Allianz currently holding 22.5%. The New York City-based firm will increase its ownership stake to 45% within the next 12 months, while Columbia will continue to manage leasing and day-to-day operations for the two buildings.
“This partnership allows us to increase market presence without issuing stock or raising leverage, and we have found an ideal partner in Allianz, which shares our investment outlook and disciplined, long-term approach to investing,” said Nelson Mills, president & CEO of Columbia Property Trust.
The post Allianz, CXP Join Forces to Acquire Prime Office Assets Across the US appeared first on CommercialCafe.
Some argue that buildings with healthy features command up to a 20 percent rent premium over market rate, in addition to savings on operational costs.
Creating healthy workplaces is the next step in the evolution of office building sustainability. “Health is a key component to real estate for the long-term,” says Rachel McCleary, Urban Land Institute senior vice president, who heads the organization’s healthy buildings initiative. She points out that a healthy workplace requires a building to meet certain performance standards, and certification is based on testing.
The healthy workplace movement got a boost a few years ago when the U.S. Green Building Council (USGBC) partnered with the International Well Building Institute (IWBI) to streamline certification processes and minimize paperwork to achieve both Leadership in Energy and Environmental Design (LEED) and the WELL certifications simultaneously.
Launched in October 2014, WELL has registered or certified 450 projects, encompassing nearly 100 million sq. ft. of space in 27 countries, including 361 office projects.
“The rapid expansion of WELL worldwide underscores the fact that building and business developers, owners, and operators are taking notice of the need to harness the built environment as a tool to promote human health and wellness,” says IWBI President Kamyar Vaghar. He notes that IWBI is seeing increasing interest from core and shell building developers looking to achieve WELL certification, as well from tenants looking for buildings that facilitate a healthy fit-out.
WELL is an evidence-based system for designing, measuring, certifying and monitoring how buildings impact the health and well-being of occupants. It provides a 100 wellness features that impact 23 health pathways across seven concepts, including air, mind, water, nourishment, light, fitness, and comfort. Applicant spaces are evaluated for one year to ensure all necessary criteria are met before achieving certification and then are re-evaluated every three years for recertification.
In a 2014 Urban Land Institute study, which looked at the business case for developing healthy buildings, 13 developers reported that healthy buildings resulted in greater marketability and faster leasing and sales velocity, in addition to commanding higher rents than pro forma projections. They said the cost attributable to inclusion of wellness features represented a minimal percentage of the overall development budget.
An IWBI spokesperson told NREI that the cost to buildout the headquarters of Structure Tone, a New York City-based design firm, with WELL features came to less than $1 per sq. ft.
Dave Pogue, CBRE global director of corporate responsibility, who recently worked with a developer on a WELL-certified project in Vancouver, Canada, says that the cost to add WELL features to a building varies considerably, with ground-up projects usually costing less because healthy features can be incorporated into what the developer is already doing. For existing projects, the cost is determined by what types of features a building already has in place.
Developers Hines and Kilroy Realty are embracing the WELL standard for new buildings going forward.
Kilroy has started construction on its first WELL project, a $450-million, 680,000-sq.-ft. office campus at Mission Bay, a tech-centric master-planned community in San Francisco.
The Mission Bay project is a pilot for the company to demonstrate the value of WELL features, according to Maya Henderson, Kilroy sustainability manager. “This is a great place to start building this type of project into our portfolio going forward,” she says.
Hines’ first building to register for WELL is 609 Main in Houston, Texas, a one-million-sq.-ft., multi-tenant building, which is also pursuing LEED Platinum.
Designed architect Pickard Chilton, the exterior at 609 Main is composed of highly reflective glass curtain walls that change colors as the weather changes. But what sets 609 Main apart are details on the inside that pay attention to the health and happiness of occupants and enhance operational efficiencies for tenants, says Hines Senior Managing Director in Houston John Mooz, who oversaw the project’s development.
The building incorporates technology that provides continuous fresh air and natural light, in addition to managing energy efficiency and water conservation. Features include heat sensors that adjust room temperature according to the number of occupants in the room and an advanced under-floor air system.
The air system added $10 million to building cost, according to Mooz, but allows each employee to control the temperature around their own desk by delivering heating and cooling through individual portals in the floor around each workspace.
The building also has 3,000 sq. ft. of dynamic glass embedded with an electric current, in addition to floor-to-ceiling windows that provide natural light. The glass turns dark when the sun is high, shading building occupants.
“Our intent was to respond to the modern day workforce of Millennials with an amenity-rich, and tech-savvy environment,” Mooz notes. Additional amenities include a rooftop garden, an 8,500-sq.-ft. fitness center and a lobby concession stand that serves coffee in the mornings and drinks at quitting time.
High-quality buildings have higher resale values, according to Mooz, so the higher cost of adding WELL features is recouped over time. He notes that buildings with healthy features command up to a 20 percent rent premium over market rate, in addition to savings on operational costs.
He notes that 2017 was not the best timing to deliver one million sq. ft. of office space in Houston, as the market has been depressed due to the energy industry layoffs. Houston’s office vacancy reached a 22-year high in the first quarter, according to real estate services firm CBRE, at 16.8 percent, and is expected to rise to 17.5 percent by next year.
But despite unfavorable market conditions, 609 Main was 65 percent pre-leased before the building was completed in May.
“Demand for buildings that promote health and wellness has continued to increase among our tenants,” says Gary Holtzer, Hines senior managing director, global sustainability office. “The WELL Building Standard is one of the leading frameworks for measuring and certifying the impact of the built environment on humans and we want to help lead the charge.”
Hines has multiple office projects across the U.S. and globally that are being positioned for WELL certification, he adds.
“This is a new way the market is going,” says Evin Epstein, sustainability analyst at New York City-based NSL Green Realty. Her company, in partnership with Hines, is developing One Vanderbilt, a 1.7-million-sq.-ft. office tower under construction in Midtown Manhattan that is registered for both WELL and LEED Platinum certifications.
Epstein shares Hines view on the marketing advantages of healthy office space. She notes that LEED provides some elements that benefit health, but WELL has a much more direct impact on tenants, with better lighting and air quality and a host of other tangible features.
At One Vanderbilt, natural light will flood 80 percent of the building, maintenance will use only green cleaning products and a water filtration system is being installed.
Designed for the modern workforce, the building will also feature floor-to-ceiling windows, extra high ceilings and 360-degree views, in addition to best-in-class building systems.
CBRE’s Dave Pogue agrees that high-performance buildings have been shown to have benefits for both tenants and building owners. He notes, however, that the hope of developers is that WELL will give a project greater market advantage, but there are too few studies so far to know if this is true. “We do think the market is highly sensitive to this sort of thing,” he notes.
Anchored by international engineering, architectural and consulting firm Burns & McDonnell, the 272,941-square-foot office property is currently 81% occupied.
Lingerfelt will operate the building through its vertically integrated operating platform. Commonwealth Commercial Partners will handle property management and Avison Young will be in charge of marketing and leasing.
Jay Kraft, senior VP with Lingerfelt, stated: “Our company is excited to enter Houston at this time. We have been tracking the market and believe the basic fundamentals are strengthening. We look forward to exploring other opportunities and expanding our presence.”
Essex acquires, develops, redevelops and manages multifamily apartment communities on the West Coast.
Schall attributed Essex’s double-digit increase in funds from operations (FFO) in the first quarter to improved pricing power in the apartment REIT’s West Coast markets.
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Merrie Frankel, president of Minerva Realty Consultants, LLC, joined REIT.com for a video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.
Minerva provides credit rating and capital structure analysis to REITs and real estate companies. The firm’s clientele includes listed REITs and private real estate companies seeking strategic analysis, companies considering going public and companies that are working through the ratings process.
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REIT returns were positive in the first half of 2017, but underperformed the broader market. Looking ahead, industry fundamentals remain solid heading into the remainder of the year, according to REIT market watchers.
The total returns of the FTSE NAREIT All REITs Index rose 2 percent in June, while the S&P 500 posted a total return of 0.6 percent. For the first six months of 2017, total returns of the FTSE NAREIT All REITs Index gained 5.4 percent, while the S&P 500 returned 9.3 percent.
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Recruiting Millennials to work in the commercial real estate sector goes beyond serving free lunch, providing unlimited vacation or lavishing other cool perks on them.
As the retirement wave continues among Baby Boomers, the commercial real estate sector is grappling with its graying workforce.
According to the Institute of Real Estate Management, the average age of a property manager is 52, and many real estate professionals are in their 40s and 50s. Facing that reality, folks responsible for attracting and retaining workers in commercial real estate recognize that they’ve got to woo Millennials in order to keep their businesses running. After all, Millennials now make up the largest generational share of the American workforce.
Yet recruiting Millennials to work in the commercial real estate sector—or any other sector, for that matter—goes well beyond serving free lunch, providing unlimited vacation or lavishing other cool perks on them.
Fortune magazine recently released its ranking of the 100 best workplaces for Millennials, and several employers in the commercial real estate sphere appear on the list. NREI reached out to executives at three of the winning companies—Concord Hospitality Enterprises, Transwestern and Walker & Dunlop—to find out why their workplaces are Millennial magnets and what lessons you can learn from these employers.
Fortune ranking: 38
Larry Heard, CEO of Houston-based commercial real estate services company Transwestern, believes that shining a light on Transwestern’s mission is critical to recruiting and retaining Millennials.
“We go to great lengths to make sure that any new employee—which would include the Millennial workers—has a very clear understanding of our mission and our vision as a firm, so they can personally buy into that,” he says. “That’s an important aspect of the decision-making tree that the Millennials go through when they’re discerning the best company to work for.”
Once they’re working for Transwestern, Millennials are encouraged to get involved in young professionals groups at the company’s major offices. That and other efforts are designed to cultivate personal empowerment, innovation and teamwork.
In trying to entice Millennial workers, Transwestern also hosts holiday parties, year-round social events, wellness activities, one-on-one mentoring and training and skill development courses.
Every Millennial unique, however, so workers in this age group can’t be lumped together and treated exactly the same. One may appreciate social activities in the workplace, while another may gravitate toward personal development opportunities.
“It’s hard to paint all of the Millennials with a single brush stroke, so I would not fall into some of the misnomers that are out there that may exist about a Millennial worker,” Heard says.
Recruiting tactics that were prevalent, say, 20 years ago won’t necessarily work with Millennials, he notes.
When trying to hire Millennials, “I do believe that the things you stand for as a firm do need to be fully appreciated and [need to] check a lot of the boxes that they have when they’re going through the process of determining where they want to work,” Heard says.
Concord Hospitality Enterprises
Fortune ranking: 81
Raleigh, N.C.-based Concord, a hotel developer, owner and operator, treats each employee—not just Millennials—like a customer, says Debra Punke, senior vice president of human capital.
“The experience from hire to retire is essential to Millennials, and if you are thoughtful about each interaction, they will join your team and stick around,” Punke says.
Millennials want to stick around at Concord because they’re energized by the company’s purpose-driven nature, she says. These workers are drawn to employers that have crafted a well-articulated mission that resonates inside and outside the workplace, according to Punke.
“Millennials want to be affiliated with an employer who cares about giving back to the communities where they live and work,” she says. “They want to be part of a company who has a greater purpose and impact.”
From what Punke has observed, some employers in commercial real estate are failing to attract Millennial workers “because they are all about the business.”
“It’s high-pressure and only the results matter. They are not purpose-driven,” she adds.
Punke says Concord fosters a work environment that appeals to Millennials in four key areas:
Charity—Concord enables employees to engage in fundraisers, volunteer projects and other charitable endeavors. Over the past decade, employees have raised $750,000, served more than 2 million meals, refurbished a dozen homes and donated 17,000 volunteer hours, Punke says.
Fun—Concord employees recognize and support each other in a variety of ways, according to Punke. She says Concord wants its workers to have fun “in all that they do.”
Sustainability—Among other things, Concord builds green hotels, repurposes soap and shampoo into bars of soap for vulnerable kids around the world and diverts tons of waste from landfills.
Wellness—On-site fitness centers and virtual competitions are among the tools that Concord uses to promote mental, physical and emotional wellness in the workforce.
“We believe if you take care of them, they will take care of the customers and the profit will flow,” Punke notes.
Walker & Dunlop
Fortune ranking: 83
Millennials who join Walker & Dunlop, a Bethesda, Md.-based provider of commercial real estate financing, find a number of opportunities to flourish professionally.
For instance, Walker & Dunlop sponsors a “high potential” program for employees who have been with the company for a few years and have established a track record of success, according to Paula Pryor, senior vice president of human resources.
In that program, a manager identifies someone who’s got the potential to rise through the ranks over the next five years and nominates that person to participate, Pryor says. Every year, executives pick 10 “high potential” employees for the program. Over the course of a year, each participant learns how to polish presentation, leadership and teambuilding skills; shadows a member of the management team; and collaborates on a corporate initiative.
Additionally, Pryor says, the company strives to help Millennials carve out a career path, which includes consideration for in-house promotions.
She notes that more than 40 percent of Walker & Dunlop’s workforce consists of Millennials.
“Not only do we place a strong emphasis on learning, opportunities for growth and recognition, but we also insist on having fun—who doesn’t love that?” she notes.
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