Ground-up Development

Ground-up Development

Case Study

Ground-up Development

Building information:

  • Address: 10360 West State Road 84, Fort Lauderdale, FL 33324
  • Square Feet: +/-34,610
  • Tenants: Kelley Kronenberg Law
  • Owner: HHMKKL, LLC

Terms:

Type: Ground – Up New Construction
Development Partner and Advisor: Equistone Partners
General Contractor: Miller Construction Company
Master Architect: Cabrera Ramos Architects, Inc.
Interior Design: Alvarez Studios, Inc.

Highlights:

– Winner of Construction Association of South Florida (www.casf.org) Commercial Project of the Year
– 10 month construction time
– Delivered on-time and under budget
– State of the art Class A construction

THE OVERVIEW & OPPORTUNITY

Equistone Partners seeks out like-minded individuals, and Mr. Heath Eskalyo caught our eye. As the Chief Financial Officer and Partner at the law firm Kelley Kronenberg Law (KKL), he is driven by the company’s success along with contributions to the community and those who are less fortunate, an exhilarating combination. In his spare time, Mr. Eskaylo is an accomplished athlete who has competed in the famed Ironman Triathlon, conquering what is widely considered one of the most difficult one-day sporting events in the world, to raise awareness and funding for children in need. Inspired by his philanthropic and athletic prowess, Equistone Partners’ Michael and Tyler Harrison reached out to Mr. Eskalyo on the phone. From just one call, a friendship blossomed, which led to multiple business dealings and a successful business relationship for years to come.

 

Headquarters Development Pad

At Equistone Partners, we pride ourselves on being attentive and taking time to hear our client’s needs. After our initial meeting with KKL, we did what we do best… we listened. We noted the benefits of their current location as provided by KKL’s employees and partners. We then asked the one obvious question, which they had yet to consider:

After careful examination, we constructed a plan together and later secured a purchase contract for a two-acre piece of land visible from Interstate 595 in Ft. Lauderdale, with an average daily traffic flow of over 200-thousand cars per day. The property is a proven winner. It provides expansion possibilities on an adjacent land parcel, freeway visibility and close proximity to KKL’s headquarters.

“You have been a conscientious tenant for over 20 years in the same building, paid your rent on time and are the largest tenant by occupancy, why not own a building or build one to your specifications?”

Syncing Strategy and Goals

The principals of Kelley Kronenberg Law (KKL) wanted an office that would fit the company culture and liked the idea of ownership. However, they would only pursue this opportunity if it would ultimately benefit their team of employees first and their firm’s long-term goals.

Equistone Partners conducted a full survey for lease/sublease, for sale and located future shadow inventory in the area. The team simultaneously located existing structures for adaptive reuse development and raw land for ground-up development for evaluation.

OUR PROCESS

Analyzing and executing a lease analysis requires its own attention and expertise. Adding a simultaneous search for raw land and existing building structures for adaptive reuse is equally as challenging.

We conducted this two-pronged approach by asking the poignant questions, we listened and developed an understanding of facility goals. We modeled the occupancy in each department to truly determine what was required for current occupancy and future growth. The Equistone Partners team assembled a group of architects, geotechnical/structural engineers, designers, general contractors and finance partners in order to develop and execute a well-thought-out strategy.

THE RESULT

Equistone Partners secured the land under a purchase contract, assembled the team, completed the due diligence, negotiated all contracts and completed the underwriting to secure bank financing. We sourced and selected a finance partner with an interest reserve, to minimize out of pocket capital for the firm’s principals, inclusive of all new furniture, computers and equipment.

The 595 CPC Building 1 project was delivered on time and under budget, delivering a building that was a top 10 finalist on South Florida Business Journal’s 2020 Coolest Offices contest and won the coveted 2019 Construction Association of South Florida (www.casf.org) Overall Craftsmanship in a Commercial Project Award.

Raw Land Acquisition

Raw Land Acquisition

Case Study

Raw Land Acquisition

Building information:

  • Address: 10360 West State Road 84, Ft. Lauderdale (Town of Davie), Florida
  • Square Feet: +/- 2.5 Acres
  • Owner: International Ownership
  • Tenants: Raw Land

Terms:

  • Type: Raw Land in the Path of Development for Kelley Kronenberg Headquarters Relocation
  • Development Partner and Advisor: Equistone Partners
  • General Contractor: Miller Construction Company
  • Master Architect: Cabrera Ramos Architects, Inc.

THE SETTING

This case study outlines the facility evaluation process and sets the stage for the future development of the Kelley Kronenberg Law (KKL) headquarters’ building. The strategy and process are a collaboration between Equistone Partners development and consulting services, as well as our robust brokerage and advisory services. Prior to the occurrence of any development or predevelopment, a site is selected and placed in a favorable contract. The site selection process often exceeds the time it takes for planning, evaluation, due diligence, pricing and construction. It is imperative to engage the right team for this journey.

Our engagement with KKL started four years prior to development of their headquarters building in South Florida. Equistone Partners was hired to conduct an evaluation for new office space, deliver renewal options and procure potential land or existing buildings suitable for development. The KKL partners saw the value in maximizing control over their own occupancy and entrusted us to seek and secure opportunities for consideration. Sometimes the path that is less traveled can yield great benefits, which KKL discovered through our engagement.

THE OPPORTUNITY

Equistone Partners has access to multiple listing services giving our clients a wide variety of options, but that alone does not provide an execution strategy. Our value proposition has changed in the information age, but what has not waivered is our ability to deliver an overall strategy by paying close attention to our clients. We listen, formulate a plan and execute. This is our mantra, whether engaged as a brokerage professional to secure property, development advisor, consultant or a general partner.

THE STRATEGY

Kelley Kronenberg Law grew steadily over the years until they became the largest tenant in the building taking over multiple floors. As they grew and expanded, the lease was amended on seven different occasions. These modifications spanned multiple ownership groups, who had purchased KKL’s income stream at various times, as the building changed hands. To be an effective partner for the client, Equistone Partners needed to understand all of the intricacies of the master lease, but also the lease amendments and modified language inserted from various new owners over the years. There are multiple leasing approaches to consider to be an effective service provider and partner. These include seven key strategies in evaluating a facility plan outlined below.

THE PROCESS

Equistone Partners conducted a full survey of all available alternative office locations in the marketplace. We also assembled every comparable lease signed in the area and toured several available locations, while engaging in renewal discussions with the landlord.

Simultaneously, we completed a comprehensive study of all the land and existing buildings that met KKL’s specific criteria. The properties that made the list were either for sale at the time or fit the requirement parameters and were off market. Our intent was to build a ground up state-of-the-art facility or buy and complete an adaptive reuse of an existing building by modifying it to suit our client’s needs. We have a firsthand understanding of brokerage, finance, ground-up development and adaptive reuse of existing structures. As an owner and advisor, we are able to find opportunities on and off market and develop a road map that delivers turnkey solutions to our clients.

OPTIONS

 

Blend & Extend/Early Renewal: The basis for this strategy is reducing the current rent per square foot, requesting concessions, improvements, HVAC work, new base year etc., while extending the current lease. This negotiation may be in combination with free rent or partial rent concession for immediate relief, while allowing the landlord more stability with a longer deal. This may also include a reduced or increased footprint.

Lease Restructure: This approach contemplates reducing the per square foot occupancy costs through rental reduction without necessarily extending the current lease term. This scenario is typically effective when the underlying tenant has limited exposure, due to a small security deposit or limited credit, and is able to walk away. If the lease is not personally guaranteed and/or the underlying tenant is reaching the point of insolvency, this circumstance may ultimately lead to a lease termination.

Lease Termination: This tactic eliminates the current lease entirely. It’s effective when the underlying tenant has little or no security deposit or letter of credit, individuals of the corporation have not signed personally on the lease and/or the underlying tenant may be reaching the “zone of insolvency.” The tenant may have to make some payment to terminate the lease, depending upon solvency, but it is likely the amount could be well below the net present value of future payments on the lease.

Sublease: This strategy is to place the space, or a portion of the property, on the market for sublease and attempt to find a subtenant that has equal or better credit than the underlying tenant. The occupant remains the guarantor of the lease and in the event the new subtenant does not make payments on the lease, the underlying tenant is still responsible for these payments.

Sublease and Restructure: This method places the property, or a portion of it, on the market for sublease to attempt to find a subtenant that has equal or better credit to the underlying renter. Once a suitable subtenant is found, a direct deal is negotiated with the landlord to remove the current resident from the lease obligation, or a portion in the event of partially taking over the space. The new lease replaces the former tenant lease, relieving the former occupant from rental obligations.

Evaluation of a Renewal/Relocation: The idea behind this action evaluates a space occupancy analysis of the most critical aspects of a new facility. We select and identify opportunities in the market, tour opportunities, submit letters of interest, evaluate the responses and drive value through this process. This strategy would include evaluation of your existing facility at new market terms, taking into account all rental concessions, free rent, move allowance(s), tenant improvement packages, favorable lease language available and more, in comparison to remaining in the tenant’s existing facility.

Evaluation of a Lease/Purchase:This strategy evaluates base rent and operating expenses paid through tenancy over a ten-year period in comparison to full ownership in a general partnership, or partial ownership in a limited partnership (or some other agreed to structure) of a building over that same time period. This procedure would be included with the Evaluation of a Renewal/Relocation to assure that terms (rent, rental concessions, free rent, move allowance, tenant improvement packages, favorable lease language etc.) for a new lease would be market driven, benefitting the client through ownership of the property.

Equistone Partners completed a full review of KKL’s business case and identified multiple strategies to pursue. The least traveled path was the right lane to take for this project, which included both the Evaluation of a Lease/Purchase and the Evaluation of a Renewal/Relocation.

THE RESULT

Multiple opportunities were identified and vetted through our strict criteria and were selected for consideration. The winner was a property in an approved office/flex/industrial park. Equistone Partners applied for 100% allocation of office to the parcel, modifying the former partial retail/flex use and closed on the property with a financial partner, SunTrust Bank in partnership with the SBA (Small Business Administration Loan). We also negotiated an option on the adjacent land for future construction of a second phase and are constructing a second building as a general partner with the firm. The first building constructed won the 2019 South Florida Craftsmanship Award for Overall Craftsmanship in a Commercial Project Award.

Landlord Representation Project Leasing

Landlord Representation Project Leasing

Case Study

Landlord Representation

Building information:

  • Address: 902 Clint Moore Road, Boca Raton, FL 33487
  • Square Feet: +/- 103,000
  • Owner: Congress Corporate Plaza II, LLC
  • Tenants: Multi-Tenant

Terms:

  • Type: Class B Office
  • Developer: Trammel Crow
  • Brokerage & Advisory Services: Equistone Partners

THE SETTING

Congress Corporate Plaza II is a single-story office building constructed in the mid-1980s in the North Boca Raton submarket. When this building was developed initially, a majority of the businesses were supporting IBM, which had a large corporate presence in Boca Raton. Over the years, the office market in Boca Raton has grown to be one of the largest in South Florida.

THE BUILDING HISTORY

Leo Ghitis is a longstanding client of one of the principals of Equistone Partners. While Mr. Ghitis led Trammel Crow Company (TTC), he developed Congress Corporate Plaza II (CCPII) and several other buildings in the South Florida area. Mr. Ghitis left his position at TTC, founded a new company, purchased CCPII and formed a new investment group. He retained Trammel Crow for the property management as part of a merger with international firm CB Richard Ellis (CBRE), where the relationship between Mr. Ghitis and Equistone Partners began. Tyler Harrison, a Managing Principal with Equistone Partners, jumped aboard the project in 2008 while working at CBRE in the brokerage and advisory services practice group. Mr. Harrison formulated and successfully executed the strategy as the team leader for the project. Prior to leaving CBRE and joining Equistone Partners in 2014, Tyler created a healthy return for the property between 2008 and 2014, which led to Mr. Ghitis’ decision to retain Mr. Harrison and Equistone Partners going forward.

THE OPPORTUNITY

As the recession of 2008 hit its peak, the occupancy of CCPII was less than 60%, while many of the existing tenants were struggling. The space, which is well located on the corner of Congress Avenue and Clint Moore Road, is a single-story Class B asset and is far superior to similar neighboring buildings. With access to multiple fiber optic providers steps from the building, a strategic benefit from the IBM days, it was attractive to technology companies and businesses with heavy data needs. Compared to other midrise buildings in nearby submarkets, this efficient space has a limited load factor as a single-story building with no overtime heating, ventilation and air conditioning (HVAC) charges.

THE STRATEGY

Occupancy levels needed to be increased and existing tenants needed to be retained. Equistone Partners was up for the challenge and found prospective tenants looking to downsize from larger spaces, as well as office users looking to reduce occupancy costs by moving from Class A midrise buildings to Class B single story offices.

THE PROCESS

The indelible relationships of the existing tenants were capitalized and, in some cases, rental rates were reduced prior to lease expirations in exchange for longer lease contracts. Rental rates for new deals were adjusted to be an economic alternative to other Class A Boca Raton offices. Additionally, operating expenses that are passed through to tenants were reviewed with a fine-tooth comb and trimmed to further reduce operational costs. As the market eventually recovered, rental rates were pushed back up over pre-recession levels.

THE RESULT

In 2019, the Congress Corporate Plaza II was sold as part of a portfolio sale at 100% occupancy, which is a testament to Equistone Partners’ success in attracting and retaining tenancy. Even though the new ownership worked closely with long-time partner, Cushman & Wakefield, on all their properties across the country, they considered working with Mr. Harrison and Equistone Partners. After several meetings during the due diligence process, the new ownership group decided Equistone Partners was the right choice to continue with leasing operations after closing. The property would see yet another change of ownership but retained its value through Mr. Harrison’s ardent involvement. Every lease that was completed post-closing exceeded the pro forma of the building.

Tenant Representation

Tenant Representation

Case Study

Tenant Representation

Building information:

  • Address: 4800 T-Rex Ave. Suite 350, Boca Raton, FL 33431
  • Square Feet: +/-11,130
  • Lease Term: 126 months
  • Tenant: Gubagoo, Inc

Terms:

  • Type: Tenant Representation Brokerage & Advisory Services
  • Brokerage & Advisory Services: Equistone Partners

THE CLIENT

Gubagoo is an innovative technology company that focuses on interactive chat solutions for the automotive dealership industry.

THE OPPORTUNITY

Gubagoo had a substantial presence in Daytona Beach and a small office in South Florida, where a key executive lived. The principals wanted to establish a headquarters in the South Florida market for executives, company operations, and for the expansion of their sales and support teams.

THE STRATEGY

Equistone Partners sought a headquarters building for the client that reflected the innovative culture of the company with a technological and forward-thinking focus. Employee retention was extremely important, as well as access to public transportation. Larger campus style projects were favored as Gubagoo had a tremendous growth rate and needed to ensure their expansion could be accommodated. Equally important was the space’s ability to have emergency back-up systems, so the company would still be operational during any interruption of electric or data services.

THE LOCATION

Options were considered in West Palm Beach and Fort Lauderdale, but the Boca Raton Innovation Campus (BRIC) checked all the key boxes and quickly shot to the top of the list. BRIC is a+/- 2,000,000 square foot complex in Boca Raton that draws power from two separate power plants, a requirement left behind by former tenant IBM. The space also has the potential to house a generator that can power 100% of the space, as an extra security measure. In addition to power backups and generator capacity, the building has access to multiple fiber optics providers. Onsite amenities include cafes, fitness centers, conference rooms and daycare facilities. The property is located directly adjacent to the Tri-Rail station for public transportation.

THE PROCESS

The rapid growth of the company was a challenge that required a creative solution. Gubagoo did not need the building’s 11,000 square feet of space on day one, instead they wanted to grow into it as they continued their rapid expansion. The shape of the unit would make it cost prohibitive to demise space less than 11,000 square feet. Equistone Partners orchestrated a creative solution that included a negotiated rent abatement. A sliding scale lease structure was introduced where the tenant paid rent based on 8,000 square feet for the first 12 months, 9,000 square feet for the next 12 months, and then 11,130 square feet starting on the 36th month through the remaining lease term. This gave Gubagoo the runway to expand into the space, in line with their trajectory of growth, without having to lease more space than they needed at the time. A right of first refusal expansion option on adjacent space was also negotiated to ensure Gubagoo would have the space they needed throughout their tenancy.

THE RESULT

Equistone Partners was able to guide Gubagoo to a creative space solution and established a successful headquarters for the company in Boca Raton, FL. The space reflects the innovative culture of the company with amenities that are sure to help retain exceptional talent into the future. The redundancies and backup systems for IT technology, along with power generation services put Gubagoo in a confident position to service their client’s businesses.

Through the creatively structured lease that Equistone Partners negotiated, Gubagoo was able to minimize the carry costs associated with its projected evolution, while maximizing flexibility to expand in the future, as needed.