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Brookfield Deal Raised Profile of San Diego-Based OliverMcMillan

Acquisition Followed Four-Month Courtship of Mixed-Use Developer
May 21, 2018
Pictured: A recent Urban Land Institute forum in San Diego featured (from left) Brookfield Residential President Adrian Foley, OliverMcMillan CEO Dene Oliver and forum moderator John Burns, CEO of John Burns Real Estate Consulting.

Courtesy: Lou Hirsh.

When mixed-use developer OliverMcMillan was acquired earlier this year by Brookfield Residential, the impact was akin to having “giant turbochargers” attached to the San Diego-based company’s finances after 40 years in business. Chief executive Dene Oliver said it also boosted what was already a significant nationwide profile for OliverMcMillan.

One sign of its newly enhanced status, Oliver told the audience at a recent forum presented by San Diego’s Urban Land Institute chapter, is that the firm recently found itself in New York City, pitching potential locations to a major financial services firm now planning to move its headquarters to Nashville.

Oliver and Adrian Foley, president and chief operating officer at Brookfield Residential, declined to name the pitch recipient and would only describe it as “a major New York company” currently headquartered on Sixth Avenue in Manhattan, noting talks are ongoing.

Global asset management firm AllianceBernstein LP earlier this month announced that it would be relocating its headquarters and eventually more than 1,000 employees to Nashville by 2022, with the transition expected to start later this year.

AllianceBernstein has not said where it is going as of May 18, but a $430 million mixed-use project called Fifth & Broadway - being developed by OliverMcMillan and a southeastern partnership called Spectrum Emery - is known to be one of at least two leading downtown Nashville candidates to house the new HQ.

Another is a multi-tower mixed-use development called Nashville Yards, proposed by San Diego-based Southwest Value Partners. While Fifth & Broadway has been under construction since spring 2017, construction has not yet started on Nashville Yards. Whichever developer eventually lands the tenant, Oliver estimated that the long-term lease could be valued at up to $150 million. AllianceBernstein so far has only confirmed that it plans to invest about $70 million in costs related to the transition.

The May 17 ULI event, held at The University of San Diego, focused primarily on the thinking and preparations that went into Calgary-based Brookfield’s acquisition of OliverMcMillan, which was completed and announced in February of this year.

Oliver and Foley recalled that OliverMcMillan in early 2017 had begun the process of seeking out large equity partners to invest long-term in its business and help it move financially beyond what had long been a project-to-project approach. Brookfield was looking to diversify into urban mixed-use developments and saw OliverMcMillan’s $2 billion nationwide project pipeline as a strong platform for achieving that purpose.

Negotiations between the two firms played out over four months in late 2017, culminating in a six-week period in which, Foley said, four or five Brookfield representatives practically resided in the San Diego offices of OliverMcMillan. They hashed out issues including disposition and re-investment in some current projects, satisfying the financial concerns of some of OliverMcMillan’s original but retiring partners, and other due-diligence matters.

“It was literally, ‘I’ll come live with you for four to six weeks and we’ll see if we like each other,' ” Foley recalled of the pre-acquisition process. “And I said I’ll bet that at the end of that six-week period, you’ll like us as much as we like you. And we’ll figure out how we can get the two points met as it relates to the value and the journey.”

The two firms meshed over common cultures and ultimately agreed on those issues and the final acquisition price, still undisclosed. Oliver said his firm gained access to Brookfield’s nationwide roster of clients and other contacts, not to mention the deep financial and development resources of its parent firm, Toronto-based Brookfield Asset Management, which oversees a global portfolio topping $250 billion.

Introduced to each other by Del Mar-based homebuilder Bill Davidson, Oliver and Foley first met last year during talks over OliverMcMillan’s planned redevelopment of a former military base site in the Orange County, CA, city of Tustin. Brookfield now has entrée into other OM projects already underway in cities such as Nashville, Atlanta, Houston, Honolulu and its home market of San Diego.

Oliver said he was ultimately swayed during negotiations by the assurances of Brookfield that it had the finances, infrastructure and other resources to handle complications that might arise post-acquisition, if OliverMcMillan had to change its relationships with both inside and outside parties involved in its multiple projects underway nationwide.

“By the way, in terms of take-home [lessons]: Pick your partners really carefully,” Oliver told the ULI audience, noting a practice he's retained since co-founding his company with Jim McMillan in 1978.

“This is an insanely difficult business,” he added later. “And the bigger and the more complex things you’re working on, the more problems there are, the more issues.”

Lou Hirsh, San Diego Market Reporter  CoStar Group   
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