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Category ArchiveSkanska USA

ACORE Lends $97M for JV Purchase of NJ Corporate Center

ACORE Capital provided $97 million to a joint venture of Rubenstein Partners and Vision Real Estate Partners (VREP) to facilitate the acquisition and capitalization of the Morris Corporate Center East & West in Parsippany, N.J., Commercial Observer can exclusively report.

Terms of the financing weren’t disclosed. The loan went towards the acquisition of one of the adjoined office buildings as well as to fund capital improvements aimed at adding amenities and attracting and leasing future tenants at the location.

The financing was arranged by Newmark Knight Frank’s Jordan Roeschlaub and Dustin Stolly, vice chairmen and co-heads of the firm’s debt and structured finance division, along with Managing Director Nick Scribani, sources told CO. NKF declined to comment on the transaction.

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Entrance to Morris Corporate Center IV. Courtesy: Newmark Knight Frank

“Morris Corporate IV is the newest and highest quality asset within Morris Corporate Center. The superiority of the property, coupled with Rubenstein and Vision’s track record with office repositioning strategies, made this a great lending opportunity for ACORE,” ACORE Managing Director Jason Hernandez told CO. “ We are confident that we have best-in-class local sponsorship and a thoughtful, well-capitalized business plan to make the property the premier option for tenants (both large and small) in the market.”

NKF—out of it’s New Jersey office—also represented Intercontinental Real Estate Corporation and Ivy Realty in the sale of the property, which is also referred to as “Morris Corporate Center IV phase two.” Intercontinental and Ivy first purchased the building from MetLife in 2015, Globe Street reported in January.

Rubenstein and Vision purchased the other building in the assemblage—called “Morris Corporate Center IV phase one”—from SJP Properties, which is the original developer of the buildings, and Northwestern Mutual earlier this year. Cushman & Wakefield brokered the deal for the sellers and announced the transaction on February 28.

Built in 2000, according to the campus’ website, the two four-story office buildings are a combined 702,707 square feet and are situated at 389 & 399 Interpace Parkway within the Morris Corporate Center campus. The buildings are connected by a large, glass atrium lobby. “Morris Corporate Center IV phase one” is currently 71 percent occupied by four tenants, including U.K.-based Reckitt Benckiser and New Jersey-based management services company Skanska USA Building, Inc., according to information from C&W.

A spokeswoman for Rubenstein Partners did not immediately return a request for comment. Vision Real Estate Partners declined to comment on the deal.

Source: commercial

Greek Drama: Construction on WTC Shrine Grinds to a Halt Amidst Financial Scandal

After a year of financial turmoil for the Greek Orthodox Archdiocese of America, construction lurched to a stop last week on the institution’s St. Nicholas National Shrine near the World Trade Center, calling into question the future of the 16-year project to replace a chapel destroyed in the Sept. 11 attacks.

Skanska USA, the lead construction firm on the project, announced in a letter to subcontractors that, because the church has missed a series of scheduled payments in recent months, workers must put down their tools at the site—at 130 Liberty Street in Liberty Plaza Park—until continued funding is assured.

“Effective Dec. 5, 2017, Skanska USA has terminated its contract with the Greek Orthodox Archdiocese of America on account of GOA’s defaults in making payments,” Thomas Perry, the director of the project, said in the letter. “Skanska is demobilizing from the project site.”

The letter, first reprinted on a Greek community website, The Pappas Post, called on subcontractors to depart the site and warned workers that they may not be able to recover any tools left behind.

“Skanska is continuing its pursuit of payment from [the church]…together with any other remedies,” Perry wrote.

The firm declined to comment further for this story.

Sources close to the construction process said that the payment defaults resulted from a financial scandal that plagued the archdiocese this year.

As reported on The Pappas Post, which described the situation as an “unprecedented crisis,” an email to the archdiocese’s managing council from Michael Psaros, its treasurer, admitted that the organization “lacked even the most basic internal controls with respect to expenditures, vendor and travel management and other basic matters of basic corporate governance.”

As a result, the church’s leaders were unhindered as they misappropriated segregated or restricted funds to pay for the travel expenses of the church’s spiritual leposader, Archbishop Demetrios, and other administrative costs, according to the email. Some of those funds, The Pappas Post reported, were earmarked for construction at the St. Nicholas National Shrine.

“The archdiocese is working expeditiously and diligently to address its financial challenges, all of which are controllable and manageable,” the church said in a statement posted on its website last Friday. “Unprecedented actions have been taken in both substance and speed to re-establish…trust [with congregants].”

Those measures include the appointment of a new chairman of the church’s finance committee, Archon Lazaros Kircos, an audit of the church’s finances by accounting firm Grant Thornton and the convening of an investigative committee to examine the St. Nicholas project, the archdiocese said.

The committee “will investigate and evaluate…the potential use of certain St. Nicholas Shrine restricted funds for the payment of archdiocesan general operating expenses,” according to the statement.

“We’re dealing with some issues,” Bishop Andonios of Phasiane, who serves as the chancellor of the Greek Orthodox Archdiocese of America, told Commercial Observer, attributing the missed payments to a combination of cost overruns and the fallout from the financial scandal. “That’s part of [the reason] why we’re doing audits.”

The Port Authority of New York & New Jersey controls the land under the new site, but reached a deal in August to lease the site to the shrine for just $1 per year. The church also has the option to buy the land for $1 whenever it wants to during the term of the 198-year lease.

In September, an archdiocese representative told The New York Post that the organization planned to exercise the purchase option once construction is complete.

Representatives from the Port Authority did not respond to a request for comment.

The shrine was designed by the Switzerland-based firm of Santiago Calatrava, the architect who conceived the Oculus at the World Trade Center transit hub, just two blocks north on Greenwich Street.

The Greek Orthodox community’s history near what became the World Trade Center dates to 1919, when a group of worshipers who lacked a nearby church raised $25,000 to purchase a tavern, at 155 Cedar Street, whose dining room they had met in to pray. After converting the building into a chapel, which they named after the fourth-century bishop Saint Nicholas, the congregation started holding services in earnest there in 1925. Beginning in 1966, construction on the World Trade Center placed St. Nicholas, on what is now the southeast corner of Liberty Street and the West Side Highway, directly adjacent to the South Tower, at 2 World Trade Center.

Although the episcopal Trinity Church Wall Street—whose St. Paul’s Chapel was constructed in the 18th century—was famously spared from structural damage after the terror attacks on Sept. 11, 2001, the community of Greek Orthodox worshipers in Lower Manhattan was less fortunate.

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The World Trade Center towers loom above the belfry of the original St. Nicholas Church—destroyed in the Sept. 11th attacks—in 1999. Photo: Getty Images

When United Airlines Flight 175 flew into the southern facade of the South Tower around 9 a.m., debris rained down on the modest four-story church building, which was only 22 feet wide and surrounded on three sides by a parking lot for the business complex. A congregant told The Wall Street Journal in 2001 that he saw human remains and an airplane’s wheel scattered around the building as he fled the church during the crisis. When the South Tower collapsed just after 10 a.m., the church was instantly destroyed, the only building apart from the World Trade Center complex to fall immediately after the attack.

In the following days, Demetrios visited the Ground Zero site to examine the religious relics from the old St. Nicholas that recovery workers had unearthed as they began to clear debris. So few artifacts from the church could be salvaged, The New York Times reported, that they were stored in a pair of suitcases.

“[St. Nicholas] is in a state of transition but not eclipse,” he said at the time.

The current size of the Greek Orthodox community in New York City is difficult to estimate, Andonios said. At the diocese’s largest New York City church in Flushing, Queens—also called St. Nicholas—typical weekend services draw about 2,000 worshipers. But their ranks swell to nearly 10,000 on important religious holidays, according to the bishop.

At the end of last week, both the Greek Orthodox Church and Skanska USA sounded optimistic notes about the project’s future.

“We regret that stopping work was the only viable option at this point in time,” Tom Webb, Skanska’s executive vice president, said in a statement. “We are confident that they will find the funding to complete this work at some point in the future.”

Andonios, for his part, said he hoped the church could draw on promised donations to get the project back on track.

“We have to date $48 million or $49 million in [pledged donations], but only $37 million have been fulfilled,” he said. “Based on that and some other steps, we’re comfortable that we can move forward again.

“We have a good relationship with Skanska,” he added. “It was a difficult decision, but they understand.”

While construction on the main structure is suspended, work will continue offsite on fabricating skylight panels intended for the shrine’s dome, and the curtain walls of marble and glass, the archdiocese said in a statement. The statement did not specify how that work will be funded.

Last Thursday afternoon, the construction site was quiet. Two blue cherry pickers sat collapsed and dormant alongside the building atop the elevated Liberty Park plaza, and any cranes had departed the scene.

Two women visiting from Texas, who declined to give their names, initially mistook the project for a mosque, perhaps conflating it with Park51, the Islamic community center project that created controversy in 2010 as politicians debated the merits of a “Ground Zero mosque.”

White tarps, covering construction materials on the shrine’s incomplete roof and facades, fluttered in the wind, disclosing gaps in the structure that remained exposed to the elements. At around 1:30 p.m., three workers appeared at the site, entered the unfinished sanctuary and shut the door behind them.

Source: commercial

The Sit-Down: Skanska USA’s Robert Ward

As the president and chief executive officer of Skanska USA’s commercial development division, Robert Ward leads the Swedish construction giant’s rapidly growing real estate development business across the United States.

Ward was only appointed to the position in July (he succeeded Shawn Hurley, who left Skanksa to become the president of Boston-based development firm Marcus Partners). But over the course of 15 years with the company—including stints as the division’s chief operating officer and executive vice president of its development units in Washington, D.C., and Houston—he has helped facilitate the steady expansion of Skanska’s commercial development footprint across the country.

Today, the division’s status as an integrated construction and development operation—and one whose position as part of a multinational behemoth enables it to internally finance most of its projects—has seen it pursue ambitious office and multifamily developments in its four core U.S. markets: Washington, D.C., Boston, Houston and Seattle.

In Boston, Skanska is currently at work on 121 Seaport, a 17-story, 400,000-square-foot office building rising above Boston Harbor and slated for completion in early 2018. Earlier this month, the firm announced that 121 Seaport is now fully leased after Alexion Pharmaceuticals decided that it will move its headquarters there from New Haven, Conn., next summer—joining the property’s other anchor tenant, technology provider PTC.

The 46-year-old Ward—a Washington, D.C.-area native who lives there with his wife and two dogs and works out of Skanska’s Arlington, Va., location—recently sat down with Commercial Observer at Skanska’s Empire State Building office to discuss his career to date, the benefits of the firm’s integrated business model from a development perspective and how it is seriously vetting Los Angeles as its fifth core market in the U.S.

Commercial Observer: While you’ve been with Skanska for 15 years, working in various capacities and in different markets, the firm’s commercial development business is barely a decade old. What has it been like to see that business grow firsthand?

Robert Ward: At the end of 2007, I was approached by some of our global colleagues about the potential of helping launch what would be a commercial development entity here in the U.S. We’ve had commercial development in Europe, in the Nordics, for 20-plus years, and there was a proposal to consider it in the U.S. at that point. I was one of three people that were selected from the [construction division], who also had a real estate background, to participate on a task force.

For the first half of 2008, we toured the country and went to a lot of different markets where we had a strong building presence, and evaluated the real estate markets there and our ability to enter those markets. In the middle of 2007, we presented a business plan to Sweden for us to launch in Boston, D.C. and Houston. In 2008, I was the only employee in D.C. for commercial development; we had one in Boston and one in Houston, and we slowly added to those ranks.

It was an interesting time, because as you recall, the fall of 2008 was not exactly the best time to launch a development venture. A lot of people were scratching their heads. It actually turned out to be pretty fortuitous; you never want to see that kind of economic downturn, but at the same time, it created opportunities for us to enter really high-barrier markets like Boston and D.C.

In 2009, we found what was supposed to be our first commercial development project here in the U.S., a site at the corner of 10th Street and G Street [in Northwest Washington, D.C.] It was a hole in the ground. There had been a financing issue with the previous development—it was a pretty complicated deal. We were able to meet with all the parties and find a win-win solution. We redesigned the building and started building on spec. A commercial, spec office building in Downtown Washington, D.C., in the fall of 2009 certainly raised a few eyebrows—but at the same time, it’s a great building in a great location, five blocks from the White House. The thought was, if we can’t lease this in a couple years, then maybe this is not the right business for us.

So fast-forward from there, we leased that building and sold it a couple of years later. It was a big win for the company and a very successful project, and it led to a second one in D.C. And that really led to the U.S. task force entity becoming a business unit.

What specifically appealed about D.C., Boston, Houston and, later, Seattle?

The task force team [that explored commercial development in the U.S.] had spreadsheets that could cover all the walls in this room with every possible metric you could consider. I think at the end of the day, we looked at—and at the time Houston was an exception to this, but Boston and D.C. certainly met this—places with higher barriers to entry that take a little bit longer generally to get into, but once you’re in them and can be successful in those markets, they tend to have much stronger longer-term viability.

A number of other typical economic [considerations]: demographics, job growth, the right industries driving [the economy], access to mass transit and looking at the government and municipal environments, in terms of zoning and entitlements and the ability to achieve those. We looked at a little bit of everything.

Houston at the time had some very strong fundamentals. It did not meet the high-barrier test per se; it’s a much larger area, and the zoning requirements there tend to be a bit different than Boston and D.C. for sure. But there was a thought that with the strength of the energy sector down there, that there was an opportunity to enter that market sooner than others.

Seattle was always on the list and likely would’ve been one of the first three cities; it rated very highly. I think there was just some concern about a West Coast operation from day one, when most of our folks were here on the East Coast. Since then, all four markets have performed well for us, and thankfully the diversity of the markets has been good for us, too.

San Francisco, New York, Los Angeles and Miami have been reported as markets that Skanska has considered expanding into. Is the company continuing to deliberate over such expansion plans?

We’ve looked at all of those markets. I would say that, right now, L.A. is probably one that we’re spending the most time on and, in the short term, is probably the most promising. I think in the future, any of those are possible. We have a wonderful presence here in New York, and at some point I would think New York should be on the list. It’s not a move we’re making today, but we like New York a lot.

We feel really good about L.A. right now. We’ve got a nice presence out there with our building teams and our civil construction groups, and we have some folks out there now looking at it very closely. The decision on our next market is probably coming at the end of this year, maybe the beginning of next. So a little more exploration, but it could be as soon as then that we’re ready to say.

How big of an advantage does the ability to call on Skanska’s own construction arm and internal financing model give you in pursuing and delivering your own developments?

Quite frankly, it’s a real differentiator for us. We can get really early, accurate pricing when we’re looking at sites. We’ve got [the building arm] literally side by side with us every step of the way helping to manage design. We don’t design buildings and go, “Oh boy, it’s over budget now. How do we bring it back?” We have the building folks at the table in lock step, so we design to a target budget.

We are in a couple of joint ventures, and in those cases we tend to finance more traditionally with an equity and debt structure. But, by and large, our projects are done with 100 percent of our own capital and with our own building company. It gives us flexibility, and it gives us the ability to be pretty nimble—if we see something that makes sense, we can move perhaps more quickly because we’re not waiting for funding approvals.

Skanska has been outspoken in its commitment to environmentally sustainable building practices. Does that give you an advantage over competitors?

That commitment, for us, is paramount. We’re committed at all of our projects to LEED Gold, but I think in many cases we go beyond that. I like the idea that we’re really focused on the tenants and occupant comfort and health and wellness, so we’re spending the money on systems in our buildings that bring more fresh air into the building and clean it through HEPA [high efficiency particulate air] filtration. Those are dollars we can spend and will spend; we’ve never been in a situation where we’ve said, “Geez, the project is a little more expensive than we’d like, hey let’s cut back on some of the sustainable elements.” Those become sacred.

What project of yours are you most excited about?

From an ambition standpoint, I would have to say Capital Tower in Houston [a 780,00-square-foot office tower, which was unharmed by Hurricane Harvey]. You’re talking about a market that’s gone through some very troubling times recently, in addition to some economic uncertainty over the past couple years.

The building itself is going to be very different than anything you’ve seen in Houston. It actually sits on a full city block that has five [pedestrian] tunnel connections. If you understand the tunnel system in Houston, that’s the way a lot of people get around, especially in the summer time. It’s the only building that has five tunnel connections—in my mind, it’s almost like the Grand Central [Terminal] of the tunnel world. What our team down there has done with this design is create this open, two-volume space to bring the tunnels up to the street, and the street down to the tunnels. So here’s really an opportunity to create a destination within the city with all kinds of cool retail, near a lot of different things in town. I think that’s one that can really be a game changer for us, and we’re doing it and making decisions to commit to all of those things at a time when that’s maybe not the obvious thing to do.

The other one I’m excited about is in Seattle, at 2+U. That’s a little under 700,000 square feet, another big tower, but the views are spectacular. They’ve basically lifted the building 75 feet in the air so that they can put a park and retail—what we’re calling an “urban village”—under it. We couldn’t do those kinds of things if we didn’t have great designers and our building guys on the team with us, for sure.

Both of those projects will deliver around the second quarter of 2019, and if you visit both [when done], I honestly think you’ll be blown away. I think both markets and the communities around them will be better for those buildings, and that’s pretty exciting.

Source: commercial