Weekly CoStar Column Spotlights Trends, New Projects and Construction Entering (Or Leaving) the Commercial Real Estate Development Pipeline
This week, engineering firm Black & Veatch
decides to buy and redevelop its Overland Park, KS, facilities rather than build a new campus; more trouble for the massive CityCenter resort in Las Vegas: Dubai World, an equity partner in the project under development,
said it has filed a lawsuit against project developer MGM Mirage; Fort Lauderedale, FL-based SheltAir Orlando Air Center Inc.
has received a nod from planning officials for a $10 million project at Orlando Executive Airport; business software maker SAS
will build a 38,000-square-foot cloud computing facility at its headquarters in Cary, NC; and FedEx
plans to build a new $14 million, 113,000-square-foot regional distribution facility in Fort Mill, SC.
Also, CoStar Group
rounds up more land sales, building deliveries and development news from around the U.S.
In The Pipeline is a column on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project --
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Read previous columns.
Black & Veatch Purchases HQ Property Near KC
Engineering, consulting and construction firm Black & Veatch, with an eye toward future expansion, announced it will purchase its building in Overland Park, KS for $60 million.
In one of the largest transactions in the Kansas City market this year, Black & Veatch agreed to buy the building at 11401 Lamar Ave. with financing secured through local banks in a transaction expected be finalized in mid-2009. According to CoStar property information, rating firm Fitch, Inc. bought the property from Black & Veatch in 1995 and leased the building to Overland Property Investment, which subleased the property back to the engineering firm.
Black & Veatch has been the sole occupant of the building since its original construction in 1976. The building was expanded to 600,000 square-feet in 1996 and is the largest office building in Kansas. With a potential total of 850,000 square feet in the campus, the site could ultimately accommodate a total employee base of more than 3,400. The existing facility currently houses more than 2,300 of the company's 3,800 workforce in the Kansas City area.
"With guidance from Overland Park, we are now able to plan for an additional 250,000-square-foot complex on the site when needed for future growth, as well as formulating significant enhancements to the existing facilities," said Len C. Rodman, chairman, president and CEO of Black & Veatch.
After a two-year analysis in which the company looked at some 40 alternatives, Black & Veatch decided to purchase and redevelop the existing site through a multi-phased site development, enhancement and expansion project.
"This decision to adapt an older facility to tomorrow's design standards brings a much larger technical challenge and will ultimately result in a more sustainable solution than constructing a new campus," Rodman said.
The project will include extensive workspace, common area and facility upgrades, improved HVAC and energy management systems, external landscaping and improvements in controlling storm water run-off and providing rainwater reuse systems. In addition, a solar courtyard, solar canopy, bio garden and an innovation pavilion are planned for the world headquarters.
Dubai World Sues MGM, CityCenter Hangs in the Balance
By Andrew Deichler
Dubai World, an equity partner in the massive CityCenter resort under development in Las Vegas, said Monday that it has filed a lawsuit against project developer MGM Mirage, alleging a breach in contract stemming from the casino owner’s inability to pay its debts.
Dubai World, through its subsidiary, Infinity World, has invested $4.3 billion in the $8.4 billion, 67-acre project to date.
In a statement, Infinity World said MGM Mirage has "mismanaged" the project, resulting in costs that have escalated more than $1 billion above initial estimates, even as some project components have been scaled back or eliminated.
"The current path of the project is simply unsustainable given our partner's financial troubles," Infinity World said, adding that it is being "asked to pay significantly more and getting less, with only uncertainty about MGM’s future."
MGM has been hit hard by the recession and the collapse of the financial markets. The company lost more than $1.1 billion in the fourth quarter last year, and its stock has dropped more than 95 percent in the last 12 months. It is more than $13 billion in debt.
MGM said in an SEC filing last week that it doubts it can continue as a going concern and is in danger of defaulting on a number of loans.
In August 2007, MGM estimated approximately $7.49 billion in costs to complete CityCenter. Since that time, the estimate has grown to $8.8 billion. A financing package, which was anticipated at $5 billion, was eventually taken down to $1.8 billion.
Infinity World said it still believes that CityCenter is a good investment and will turn a huge profit upon completion. It said it is committed to working with MGM to resolve the issues at hand and ensure that the project delivers.
The news comes just days after MGM completed its
$775 million sale of the Treasure Island Hotel & Casino to investor Phil Ruffin.
This is the second time this year that the CityCenter project has faced problems.
Back in January, CityCenter announced that it was delaying the opening of the 400-room Harmon Hotel & Spa until 2010 and canceling the 207-unit Harmon residential condominium component. Those changes will save an estimated $600 million and defer about $200 million in construction costs, but also mean refunding deposits to the buyers of 88 units that were pre-sold. Robert Baldwin, president and CEO of CityCenter, cited "contractor construction errors" as the reason for cancellation.
Due for completion later this year, CityCenter is an 18 million-square-foot development located between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. The "city within a city" will feature the Aria Resort & Casino, three luxury non-gaming hotels, 2,400 residential units and a retail/entertainment complex. The mixed-use development is expected to create more than 12,000 jobs.
PeopleFund, a community development nonprofit, said it would break ground in July on a new headquarters in east Austin, TX.
The 10,000-square-foot office building is being constructed at 1719 Alexander Ave. in the Chestnut Plaza mixed-use development. The building will share a courtyard with the Sustainable Food Center and a satellite location of the Austin Children's Museum.
Earl Swisher of Lawrence Group Architects is designing the facility. The family of Tom, Lynn and Will Meredith donated the land. Completion is scheduled for the summer of 2010.
The facility will house PeopleFund’s affordable housing program, known as PeopleTrust, and its loan operations. The organization said it is raising money to cover the $3 million cost of the project.
Aviation Firm Seeks Hangars, Hotel at Orlando Airport
Orlando, FL, planning officials are recommending approval of a $10 million plan by a Fort Lauderdale firm to build a new aviation terminal and hangars, a 74-room hotel and office space at Orlando Executive Airport.
The Orlando Municipal Planning Board on March 17 recommended approval of SheltAir Orlando Air Center Inc.’s application for the project at the southeast corner of Maguire Boulevard and E. Amelia Street, which would include 22,322 square feet of hangar and office space and a 30,265-square-foot Microtel Inn & Suites hotel in its first two phases, envisioned for completion by March 2010.
The next two phases, an 8,400-square-foot flight center office and two additional hangars and office space totaling more than 27,200 square feet, would be finished in late 2011, according to a planning board document.
The project will be on 37.7 acres leased by Sheltair Orlando Air Center, Inc from the Greater Orlando Aviation Authority.
SAS to Build $70M Cloud Computing Facility Near Raleigh, NC
Business analytics software maker SAS announced construction of a 38,000-square-foot cloud computing facility at its world headquarters in Cary, NC.
The facility will include two 10,000-square-foot server farms, the first of which is expected to be on-line in mid-2010 and support data-handling growth for three to five years. SAS will build Server Farm 2 as a shell populated with mechanical and electrical infrastructure once the first server farm reaches 80% capacity. The facilities will be on SAS’ Cary campus, where the company employs 1,400 research and development workers.
SAS will build to Leadership in Energy and Environmental Design (LEED) standards for water and energy conservation. The sustainable construction methods encourage recycling of materials, similar to the Executive Briefing Center under construction on the Cary campus. SAS’ first LEED building, SAS Canada’s headquarters in Toronto, opened in April 2006.
FedEx Announces New South Carolina Facility
FedEx Ground, a subsidiary of FedEx Corp., plans to build a new $14 million, 113,000-square-foot regional distribution facility in Fort Mill, SC.
The South Carolina Department of Commerce and York County made the announcement for the build-to-suit project in Lakemont Business Park, developed by Crescent Resources LLC. In addition to 22 fulltime jobs, FedEx also expects to add up to 84 part-time positions and 99 independent contractor opportunities. The project is reportedly slated for completion in October.
South Carolina Secretary of Commerce Joe Taylor said FedEx’s decision "speaks volumes to the momentum in this area and the quality infrastructure and convenient access to markets."
Pittsburgh-based FedEx Ground has more than 71,000 employees and independent contractors nationwide.
In The Pipeline is a column on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project --
and sign up to be added to our distribution list to receive future In the Pipeline columns for free by e-mail.
Read previous columns.
More Land Sales and Development News
Church of Jesus Christ of Latter-day Saints purchased six acres of commercial land on West Duplex Road in Spring Hill, TN, from a private owner for $1.3 million, or about $212,600 per acre. The parcel is in the Southwest submarket. The buyer plans to build a church on site. Pete Crutcher of Clayton Real Estate Services represented the seller in the transaction. The buyer had in-house representation. (By Jamie Derizzio, CoStar COMPS #1663422)
Epoch Management Inc. purchased three parcels on Salisbury Road in Jacksonville, FL, from Hallmark Partners for $8.1 million, or $405,000 per acre. The parcels total 20 acres and are located in the Southside submarket, adjacent to Southpoint Business Park. Epoch is constructing a 360-unit multifamily complex on the property, scheduled for completion in late 2010. No brokers were used for this deal. (By Martin Maguire, COMPS #s 1669197, 1669196 and 1669201)
The
Fremont (CA) City Council has approved the construction of a 70,000-square-foot, mixed-use building on the north corner of Hastings & Capitol Avenue. The project will include ground floor retail, medical offices on the second floor and two-level residential lofts on the third and fourth floors. The $15 million project is being developed by Hasting Medical Associates. Dharam Salwam, a Bay Area real estate developer, and Bhupinder Bhandari, a Fremont gastroenterologist, are members of the Hastings Medical Associates and owners of the property. BKBC Architects, Inc. is the lead designer for the project that is expected to break ground in the fourth quarter and be completed mid 2011. (By Mario Munoz)
Mesa Linda Investment Co. sold 99 acres of land at the southwest corner of State Highway 395 and Mesa Street in Victorville, CA, to Industrial Commercial Properties for $2.6 million, or about $26,200 per acre. Although the land is currently zoned residential, the buyer plans on having the land rezoned for industrial use. There were no brokers involved in the transaction. The deal was done in-house. (By Brian Barga, CoStar COMPS #1652454)
Southwest Regional Council of Carpenters, a partnership that represents over 65,000 union carpenters in five states, purchased about six acres on McDowell Road in Phoenix from a private owner for $1.85 million, or about $311,000 per acre. Known as Rusty Spur Ranch, the parcel is near Whispering Palms Apartments. The buyer plans to develop the land. Robert Kawa of Kawa & Associates Inc. represented the buyer. The seller was self-represented. (By Dale Zavodsky, CoStar COMPS #1655795)
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