On April 23, 2013 the ULI Young Leaders Group brought together a diverse panel of young acquisition experts to share their perspectives on the process and tricks of underwriting office buildings in one of the United States’ hottest office markets. Darwin Rodriguez from Eastdil Secured, Brandon Wong from Kilroy Realty and Jamie Coffin from TMG Partners formed the workshop panel, offering insights from three unique sides of the acquisition process. After a quick briefing on product and buyer segmentation, the presenters walked the group through the traditional stages of the acquisition process from marketing and buyer selection to contract negotiation and due diligence, then on through project financing and closing. The panel spoke candidly about the nuances of the deal process and the challenges they each face respectively as brokers, operators and developers.
The panel concluded their presentation with two case studies illustrating the diversity of deal types and different approaches used in the acquisition processes. Highlighting Kilroy’s recent deal at 360 Third Street, Brandon Wong described his firm’s approach to an acquisition in which they were able to leverage their cash position, ability to close quickly and strong reputation in order to get the deal done. Outlining the recent purchase of an under-used office/manufacturing building at 1550 Bryant, Jamie Coffin described TMG’s attempt to take advantage of the red-hot market through a less orthodox rehab and flip process. In this case, by focusing on capital expenditure and targeted tenant recruitment Kilroy achieved strong returns on investment at 360 Third Street. While at 1550 Bryant, TMG’s willingness to deal with a tricky entitlement issue and near-term vacancies allowed the company to capitalize on the market to market opportunity by repositioning the asset as an attractive investment for a future core or core-plus buyer.
From all sides of the equation, the message was clear; in the end, it is all about the real estate. Credit Tenants, Non-credit tenants, core asset or value-add investment – no matter what the acquisition strategy or who the buyer, “the most important thing is to be comfortable with the real estate. Once you are sure of that, everything else will fall into place.”
Authored by: Anthony J. Blout, The Concord Group