These CCIMs deliver despite the uncertain economy.
As predicted, 2008 was not an easy year for CCIMs. But despite the challenges, they still closed transactions in every commercial real estate sector and in every U.S. region. Commercial Investment Real Estate received more than $3.4 billion in deals to consider for this article — and that’s only a fraction of the total annual volume for all designees. It was difficult to choose among so many exemplary submissions, but in the end CIRE narrowed it down to 10 transactions that best represent the breadth and complexity of the whole. These projects prove that, using their extensive knowledge and creativity, CCIMs can thrive in all market conditions.
Aaron Barnard, CCIM
Director, Private Capital Group
Cushman & Wakefield
Eden Prairie, Minn.
Jill Rasmussen, CCIM, SIOR
Cushman & Wakefield
Eden Prairie, Minn.
Two CCIMs and a CCIM candidate overcame financing obstacles to close a six-building medical office portfolio purchase.
“When the deal went under contract in early 2007, the world was a lot rosier,” Barnard says, referring to their client’s purchase of a six-building medical office portfolio totaling 58,198 sf in the Chicago area. “Then the bottom started to fall out,” he adds. On top of dealing with aging buildings, unspent construction funds, and an out-of-state buyer, the deal’s loan assumption fell through, and new financing was frozen.
With the help of CCIM candidate Rob Youngquist, whom Barnard credits with spearheading the deal, he and Rasmussen retooled the loan package several times at the bank’s request. “It was a moving target,” Barnard says. The team opted to create a membership interest purchase agreement, which finally freed up financing for the more than $11.3 million deal. “Whenever there are obstacles, there’s a push for creative problem solving,” Barnard says. “CCIM taught us to be facilitators, not just brokers.”
A. Alan Tapie, CCIM
Grandbridge Real Estate Capital LLC
Despite fundamental market setbacks, Tapie secured a $15 million loan to refinance a historic property.
A 108-unit luxury apartment complex in the heart of New Orleans, 925 Common St. has a lot going for it: Listed on the National Historic Register, it is located on a 50-year ground lease across from the Orpheum Theater and just two blocks from Bourbon Street. As one of the first large New Orleans multifamily properties to reopen after Hurricane Katrina, the mayor even presided over its ribbon-cutting ceremony.
Trying to secure a refinancing loan for the property, Tapie assisted with a “focused marketing” campaign that attracted medical professionals at a nearby hospital and other high-end tenants. But despite the property’s strengths, finding a loan was difficult. The fallout from Katrina and the market slowdown had eviscerated institutional financing in New Orleans. “There was only Fannie, Freddie, and HUD, and we needed Fannie’s blessing,” Tapie says. In January 2008, he was blessed, securing a $15 million Fannie Mae loan, “aggressively underwritten” at 78 percent loan to value with 1.2 debt service coverage ratio.
Tapie cites smart marketing and Fannie Mae’s “vested interest in housing” as the basis of his success but adds that his CCIM designation lent credibility to the deal. “It was the cherry on top,” he says. Though 925 Common St. was evacuated last year during Hurricane Gustav, it continues to thrive at nearly 100 percent occupancy.
Keoni Fursse, CCIM
Block & Co.
Kansas City, Mo.
Fursse negotiated with five owners and the city of Seattle over the course of four years to broker this landmark development project.
Hired to lease the 1200 Stewart St. building located on the Denny Triangle block near Seattle’s central business district, Fursse, then co-owner of Fursse & Hall Realty, saw potential for development and introduced himself to the other owners on the block. In October 2004, developer Lexas Cos. proposed a $500 million project that consisted of two 36-story Leadership in Energy and Environmental Design-certified mixed-use towers containing 252,401 sf of retail and office space, a 300-room hotel, 326 apartment units, and parking for 1,000 vehicles.
Fursse, who also represented Lexas Cos., began negotiating with each owner on the block while simultaneously working with the city to rezone the block’s height allowance from 125 feet to 400 feet. “It was definitely a roller-coaster process,” Fursse says. “Each owner had its own objective, timing, and price expectation.” This situation was complicated by the rezoning, which contributed to “[some of] the owners’ unrealistic expectations,” Fursse adds. But after four years of negotiations, Fursse closed on the last of seven parcels in early 2008. The project is set to break ground this year.
Fursse has since moved to Kansas City, but he and Lexas continue to look for similar projects. “The distressed market creates opportunities nationwide,” he says. “At some point, you’ve just got to roll up your sleeves and get dirty.”
Mark S. Klein, CCIM
Klein & Heuchan
For Klein, this land deal marked a fortuitous peak between the valleys of the residential downturn and the collapse of the auto industry.
Before the residential bubble burst, Klein and DCL Property negotiated with a home builder who was interested in purchasing a 31-acre site in Pasco County, Fla., one of the state’s fastest-growing counties. “The home builder desired to down zone the majority of the acreage to residential and leave only four commercial acres, which required a metropolitan planned unit development,” Klein says. The buyer also had to contend with the municipality, which wanted to bisect the site with a realigned road to alleviate traffic problems.
Then, when the residential market started to crumble, the home builder pulled out of the deal. Having foreseen this outcome, Klein had found an interested auto dealer that could benefit from the prominent location on the realigned road. But this buyer needed more commercial acreage and essentially reversed the old buyer’s PUD.
With additional commercial acreage zoned for the site, Klein and the seller increased the asking price to $10 million. The buyer hedged, and Klein again relied on his intuition: “I foresaw the problems with the auto industry [that would come to a head at the end of the year] and offered them a $1 million discount,” he says. The buyer accepted the $9 million price, and the deal closed on June 16, 2008.
Scott Bazoian, CCIM, SIOR
Senior Vice President
Colliers Turley Martin Tucker
James W. Mosby, CCIM, SIOR
Colliers Turley Martin Tucker
Though the office market has since stalled, these CCIMs overcame the St. Louis blues with a large sale-leaseback deal.
Originally the owner and sole occupant of a 263,000-sf build-to-suit office property in St. Louis, Solutia needed to secure a five-year lease renewal with tenant Pfizer and lease the remaining 45,000 sf before it could put the building on the market. Bazoian and Mosby rose to the task and negotiated a renewal with Pfizer and a new lease with Saviss.
After the building reached full occupancy, “we engaged in a detailed national marketing campaign and ended up with seven or eight qualified buyers,” says Paul Hilton, who collaborated with Bazoian, Mosby, and Mike Hanrahan on the sale-leaseback. “The challenge was structuring a lease that allowed Solutia to maintain some of their owner rights,” which included cafeteria access, heightened security, and a prominent lobby identity, Bazoian says. Again, the team prevailed: Though Blue-rock Realty paid more than $42.7 million to gain ownership, lobby signage makes it clear that Solutia has not left the building.
Solutia headquarters, St. Louis. Photo credit: Doug Abel Photography
Gary D. Gregory, CCIM
Sperry Van Ness
Tim Strange, CCIM, SIOR
Sperry Van Ness
This sizeable multifamily transaction reflects the Oklahoma City market’s strength amid the downturn.
It happened fast. Gregory listed the Legacy Apartment portfolio totaling 1,325 units in Oklahoma City, Edmond, and Midwest City, Okla., on a Monday morning. Within an hour, Strange was speaking to Terry R. Yormark II, an investment adviser with Sperry Van Ness in Arlington Heights, Ill., who co-represented Chicago-based Inland Real Estate Acquisitions. With negotiations underway, Gregory assigned Andy Burnett, an investment adviser with Sperry Van Ness in Oklahoma City, to “take the deal over the goal line.” And then, touchdown: The portfolio was sold to Inland for more than $132 million.
“The market has not seen a portfolio of this quality transact in many years,” Gregory says. Indeed, one of the properties, Legacy at Arts Quarter in Oklahoma City, achieved a state record price of $129,033 per unit. Gregory and Strange hope to facilitate more record breakers this year: “Oklahoma City is one of the best places to be in 2009,” Gregory says. “We had our credit crisis in the early 1990s and did not repeat the overbuilding and top-of-market mistakes this time.” And Strange adds: “This deal speaks not only to the stability of Oklahoma’s economy, but the desirability of the local market to national investors.”
Darrell Okada, CCIM, SIOR
NAI Puget Sound Properties
Okada’s new marketing strategy helped a buyer increase occupancy by 30 percentage points shortly after purchase.
The 149,030-sf Airport Business Center in Everett, Wash., had been on the market for more than a year and was struggling at 57 percent occupancy when Okada and an interested buyer stepped in to diagnose the problem. “The leasing marketing efforts did not provide solutions suitable for a typical tenant,” Okada says. “We came up with over a dozen different space configurations to present to the market in order to get attention from the widest range of potential tenants,” he adds.
After Suncoast Investors/J&J Commando LLC purchased the building for $10.4 million, the new marketing plan worked like a charm: “We were able to secure a letter of intent for over half of the vacant space by the time the feasibility period expired,” Okada says. The sale closed in July 2008, and within six months the building was 87 percent occupied.
Though the new marketing concept was a key factor in the overall success of the deal, Okada also credits his relationship with the buyer. “The buyer was a partnership,” he says. “Their local ties and understanding of the market streamlined a deal that might have been more difficult with an institutional owner. Sophisticated owners appreciate a CCIM’s ability to communicate.”
Hamid Ghaemmaghami, CCIM, CPM, GRI
City of Oakland
Ghaemmaghami worked for two years and faced opposition from the city council and community groups to secure a lease for this historic lakefront property.
In 2002, Oakland, Calif., voters passed Measure DD, a $200 million bond measure that would fund improvement projects around Lake Merritt, including the $13.4 million renovation of the historic 9,200-sf Lake Merritt Municipal Boathouse. Built in 1909, the long dormant boathouse has retained the feel of the original design while being updated to achieve LEED Silver certification. “It looks beautiful,” Ghaemmaghami says.
After the bond measure passed, Ghaemmaghami sought approval for a private tenant to occupy the newly renovated public space. By the time he began negotiations with restaurateur Chalet Management LLC in 2006, the public outcry was fierce. Protests, lawsuits, and debate in the city council all threatened to derail the deal. But Ghaemmaghami’s political problem had a political solution: Mayor Jerry Brown cast the deciding council vote to green-light the project. Chalet signed a 20-year, $3 million lease with two five-year options for their new restaurant, The Lake Chalet. “[The boathouse] can now bring investments and jobs at a time when they’re sorely needed,” Ghaemmaghami says.
Lake Merritt boathouse, Oakland, Calif. Photo credit: Barbara James
David Fisher, CCIM
Senior Vice President
Inspired by his CCIM training, Fisher sealed a hospitality deal despite a weak asset and turbulent negotiations.
*Read Fisher's full account of this challenging deal.
In November 2007, Fisher was assigned to represent the seller of a 124-room branded hotel in northern California. The property had no after-debt cash flow and was located on the site of an old city dump that was leaking methane gas, which made marketing challenging and, as Fisher notes, “stinky.” But one week after he started marketing the property, Fisher found a qualified buyer and opened a double escrow that included the land transfer. The property was on a land lease, but the owner promised to deliver it fee simple, despite the fact he was suing the underlying land owner as well as the city and the contractor who had added the second hotel wing.
Nevertheless, his client assured him that the deal was moving right along, so Fisher took a well-deserved vacation. That’s when the wheels fell off, he says.
The buyer, fearing the land could not be delivered, had left for the Philippines. The seller and the buyer’s attorney locked horns, the lender left the table, and all four attorneys began preparing lawsuits. Back in San Diego, Fisher picked up an old CCIM course binder, searching for inspiration. “I recall reading the words ‘professional focus, objective, personal needs, and describing the benefit’ — it was an epiphany,” Fisher says. “I suggested that [the seller] … carry a secured second [mortgage] with the buyer placing 20 percent down … and interest for only four years.” The buyer jumped at the offer, the bank was happy to accommodate a new borrower given the added security for their assumed loan, and the attorneys received orders to stand down. Six months after that first whiff of methane, the $9.57 million deal closed.
M. Clark Baldwin, CCIM
Senior Managing Director
Newport News, Va.
Baldwin and a partner beat the local market odds, negotiating a sizeable retail transaction despite losing a major tenant.
When the 120,920-sf Williamsburg Marketcenter in Williamsburg, Va., was put on the market in January 2008, the local retail climate was less than ideal. “Conditions for retail leasing were rather soft,” and the investment market was heading in the same direction, Baldwin says. But Baldwin and partner Jay Joseph stood firm, organizing a comprehensive marketing package that emphasized Williamsburg’s “growth market.”
During this initial push, A&N, a 139-year-old, 50-location company and one of the retail center’s key tenants, was liquidated, resulting in a loss of more than $100,000 per year in rent. “It was a surprise to everyone,” Baldwin says. But Baldwin and Joseph recognized the versatility of the vacant space and provided a defensible financial model to interested buyers. Turning a potential setback into an asset, they were able to negotiate one of the largest 2008 retail sales in the Williamsburg market when Waitzmc LLC purchased the property for $23.7 million.