Fall 2011 by Colliers

Knowledge Leader

co ll iers i n ternatio nal propert y mag azine

Dexus:

Global Partnership

Social Media:

CEOs Who Tweet

Business Class: savvy Travel Tips

fa ll 2 0 1 1

The Shard Londonâ&#x20AC;&#x2122;s New Icon

contents 4 Outlook 20/20

Top U.S. retailers are migrating north. BY James Smerdon

6 Spotlight

Chicago’s Illinois Center Two; Corporate Finance Series report; U.S. parking rates; Q&A with Karen J. Whitt.

20 Out with the New, In with the Old

High oil prices and hotels don’t mix. BY John B. Corgel and Jamie Lane

12 Working Space

Small energy-efficient fixes can mean big savings. By Jeff Bond

14 Bank Notes

The Federal Reserve is testing banks. BY KC Conway

16 London Bridge Is Going Up

London’s skyline is changing dramatically thanks to a tower of glass known as The Shard. BY Ruth Bloomfield

www.knowledge-leader.com

Ontario’s Perimeter Development is revitalizing outlying communities. By Sarah Eadie and Cheryl Reid-Simons

24 Business Partners

10 B2B

20 36

A local partnership between DEXUS and Colliers International Australia goes global.

by John Wolcott

28 Behind the Scenes

Credit Suisse’s Daniel Tochtermann has a passion for real estate. by michelle santos

34 Follow the Leader

Which CEOs are tweeting? And should you follow suit? By Aaron Blank

36 Personal Biz

Travel smart when doing business overseas.

by Annika Hipple

40 In Focus

New technology is bringing together talents, resources and ideas.

by Doug Frye

Cover Photo ©sellar group

Colliers international Spring 2009

Volume 5 u Number 3

From the Editors’ Desk

Knowledge Leader

co ll i ers i n t er n at i o n a l propert y m ag a z i n e

Executive Managing Editors David Bowden

Dylan Taylor

IN BETWEEN THE LINES

Dylan Taylor and David Bowden Editor

Teresa Kenney Associate Editors

Colliers International is honored to be one of four joint sole agents named to

the London Bridge Quarter development, particularly because we feel the project’s significance extends beyond the visible impact it will have on the skyline. Not only does the London Bridge Quarter contain The Shard—one of the most striking buildings in Europe—but the project as a whole is a bold step in the ongoing redefinition of London, one of the world’s greatest cities. This unique vertical community compellingly illustrates the power of international cooperation and the willingness to discover innovative solutions to seemingly insurmountable problems. Inspired by this international alliance, the Fall issue of Knowledge Leader takes a global perspective, looking at major trends in commercial real estate worldwide. Our cover story on London Bridge Quarter’s iconic new skyscraper reveals how The Shard has continued to rise through hard economic times, and how British developer Irvine Sellar turned his vision into reality with the help of resources from around the world. Other features include: • A profile of DEXUS Property Group, a leading integrated real estate brand in Australia, and its blueprint for international expansion through local partnerships; • A look at a new report that projects the impact of global oil prices on the hospitality sector; and, • An interview with Credit Suisse’s top real estate exec, Daniel Tochtermann. Closer to home, our Outlook 20/20 column examines the economics behind the U.S. retail invasion of Canada. KC Conway, Executive Managing Director of Real Estate Analytics for Colliers, examines plans for stress testing of the banking industry in Bank Notes. You’ll also find articles on global travel tips, CEOs and social media, and FS Energy’s visionary plan to reduce energy consumption in the built environment. As always, we hope that Knowledge Leader both informs and inspires you to greater success in your own business.

Christine Schultz, Lex Perry, Aaron Finkelstein Art Director

Amy Wallace Project Manager

Heidi Page Contributing writers

Aaron Blank, Ruth Bloomfield, Jeff Bond, KC Conway, John B. Corgel, Sarah Eadie, Doug Frye, Annika Hipple, Jamie Lane, Michelle Santos, Cheryl Reid-Simons, James Smerdon, John Wolcott Proofreader

Jim Thomsen advertising sales

Jenna Badu-Antwi This magazine is published by Colliers International

To order more copies, learn about advertising options or subscribe to Knowledge Leader, visit www.knowledge-leader.com.

David Bowden Chief Executive Officer | Canada Colliers International

Dylan Taylor Chief Executive Officer | USA Colliers International Tiger Oak Publications 1518 First Avenue S., Suite 500 Seattle, WA 98134 Knowledge Leader is published three times annually by Tiger Oak Media, Inc., with offices at 1518 First Ave. S., Suite 500, Seattle, WA 98134; 206.284.1750. © Tiger Oak Media, Inc. All rights reserved. POSTMASTER: Send address changes to: Knowledge Leader, Colliers International, 601 Union Street, Suite 4800, Seattle, WA 98101. Publications Mail Agreement No. 40064408. Return Undeliverable Canadian Addresses to: Express Messenger International, P.O. Box 25058, London, ON N6C 6A8. Printed in USA.

knowledge leader fall 2011

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Outlook 20/20

h ot to pic s m a kin g h e a d lin es to day

In late 2010, Target announced it was expanding into Canada

Target Market Canadian Economy Lures International Retail Interests. By James Smerdon Target Corporation’s late-2010 announcement of expansion into Canada leaves Kroger,

Walgreens, and CVS Caremark as the only top-10 U.S. retailers who have not publicly announced plans to open stores in Canada. Target’s acquisition of up to 220 Zellers stores continues to be a huge story in Canadian retail, and could be part of the biggest story in North American retail for the next decade. 4

knowledge leader Fall 2011

Strong Loonie One of the most compelling factors for U.S. retailers to open stores north of the CanadaU.S. border is the value of the Canadian dollar relative to the U.S. dollar. As the Canadian dollar strengthens, it’s increasingly worthwhile to establish Canadian stores rather than sell only to Canadian customers online or in the United States. For some U.S. retailers, Canada is the largest, closest, and/or most similar market to the U.S. market, and represents a logical move to maintain revenue growth. While not all retailers are compelled by the same macro-economic factors, the exchange rate plays some part in the spate of recent announcements of U.S. retailers opening shop in Canada. As recently as 2004, Canada’s retail sales per capita were US $8,000 compared with approximately US $12,000 per capita in the United States. However, with the appreciation of the Canadian dollar, per capita retail spending in Canada now approximates the U.S. By itself, this would certainly attract new interest in the Canadian retail market, but when one considers that the available retail space in Canada (on a per-capita basis) is substantially less than that in the U.S., it becomes even more attractive. Compared to the U.S. retail market, Canada represents a bounty of untapped potential. The United States has 38 square feet of retail floor area per capita, compared to only 24 square feet in Canada. This means that Canadian retailers’ average productivity is CA $530 of sales per square foot compared to only US $320 south of the Canada-U.S. border. If American retailers can maintain the same cost structure and operational efficiency in Canadian stores as they do in U.S. stores, there is the potential for significantly greater profitability. Drew Keddy, Vice President of Colliers International in Canada, leads the firm’s retail practice and notes that Canada is considered a very attractive destination for high-end retailers. “Canada is uniquely positioned in terms of market attractiveness to retailers. Our economy has bounced back faster than other markets around the world and our currency continues to strengthen. These factors, coupled with high sales per square foot and relatively low rent rates, create perfect conditions for international players to expand their presence here.” knowledge-leader.com

Largest U.S. Retailers by Revenue (2010)

Sell to Canadians in Canada Establishing stores in Canada could also keep Canadian shoppers north of the border instead of being lured to the U.S. by sales, outlet stores or other incentives used by retailers to entice recession-weary shoppers. In Canada, total retail spending increased by a comfortable 5 percent from 2009 to 2010, and retailers have not, by and large, had to dramatically cut prices to maintain sales volumes. U.S. retailers view the Canadian market as an opportunity to sell merchandise at full sticker price—or in many cases, at higher prices—than they do in the U.S. For a U.S. retailer not currently in Canada, expansion north can be a logical next step in its growth strategy. With an exchange rate that now favors the Canadian dollar, Canada is only slightly smaller than California in terms of total retail market potential. For U.S.-based retailers that have locations or supply chains close to major Canadian population centers, the move to establish stores in Canada is an easier decision. It’s estimated that more than 70 percent of Canada’s population lives within 100 kilometers (approximately 62 miles) of the Canada-U.S. border. Many U.S. retailers could supply a first phase of Canadian expansion using existing supply chains, which significantly reduces the investment and risk associated with entering the Canadian market.

Competition Affects Retailers and Owners Differently Target has attracted a lot of attention with its goal of 200-plus stores and CA $6 billion in sales in Canada within six years. In comparison, Loblaw Companies had sales of CA $31 billion in 2010, while Walmart had sales of CA $15 billion. However, at $6 billion, Target will generate triple the spending relative to the Zellers stores they will be replacing. This extra spending is not likely to come from induced demand (conversion of saving to spending). Much of the spending that Target will attract in Canada will be transferred from other competing retailers. For Canadian retailers and property owners, the impact of Target’s migration will last well beyond the initial store openings. Competitors will invest in new locations and existing stores will undergo renovations to establish market position. Once Target stores are open, there could be additional acquisitions of Canadian brands that cannot compete head-to-head with Wal-Mart and Target. In general, the next five knowledge-leader.com

1. Walmart 2. Kroger 3. Target 4. Walgreens 5. Home Depot 6. Costco 7. CVS Caremark 8. Lowe’s 9. Sears 10. Best Buy years will likely see a period of declining profit margins for large Canadian retailers and revenue growth for retail property owners, as increased retailer competition impacts both parts of the retail economy differently. Some of the major brands rumored or confirmed to enter the Canadian market include: •

• • • • •

Marshalls (Part of the TJX Companies, which already operates Winners and HomeSense stores in Canada and has five stores in the Toronto region.) J.C. Penney Topshop J.Crew Kohl’s Dick’s Sporting Goods

The Next Wave Canadians can expect to see some of their most familiar national chain stores disappear as foreign retailers look for opportunities to set up shop north of the border. Some retailers will face a decreased market share as U.S. retailers gain prominence in Canada, while others will become prime targets for acquisition as American retailers look to move into the market quickly and easily, rather than on a store-by-store basis. With the Canadian retail sector pushing forward at a sustainably healthy rate, demand for space in shopping centers and street fronts will continue to get tighter, resulting in an increase in lease rates, particularly in growing urban markets. For retailers that need greater numbers of stores to

Walmart, Home Depot and Costco were among the largest U.S. retailers by revenue in 2010.

maintain economies of scale entering Canada for the first time, the Walmart and Target approach of buying a chain with similar location and size preferences has many advantages, including establishing a banner across the country quickly, launching operations in familiar and tested retail locations, and acquiring existing leases that have lower base rates than what they would pay if they signed brand-new leases. K L Colliers international fall 2011

spot l ig h t the people, places

Illinois Center Two in Chicago’s East Loop submarket is currently 83.8 percent occupied.

a n d e v e n t s sh a p i n g t h e i n d u s t r y

>Unique Properties

Chi-Town Tower

has retained Colliers International, Chicago to market and lease 233 N. Michigan Avenue, a 1.1-million-square-foot Class A office tower in Chicago’s East Loop submarket. Originally constructed in 1972, the 32-story office building is part of the 4.66 million-square-foot Illinois Center at Michigan Avenue and Wacker Drive. Also known as Illinois Center Two, it is currently 83.8 percent occupied by major tenants including the U.S. Department of Health and Human Services, United Healthcare, Clear Channel Communications, Motorola, and Young & Rubicam. CommonWealth REIT’s purchase of 233 N. Michigan continues a recent trend of increased activity throughout Chicago’s central business district. “The first half of 2011 has seen a flurry of investment sales in Chicago, either through outright sales or debt restructuring, which has resulted in increased opportunity for a change in third-party leasing,” said Drew Nieman, principal of Colliers International, Chicago.

C o S ta r

CommonWealth REIT

knowledge leader fall 2011

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> Trends

> In the News

Corporate Finance Series In the latest installment of its popular corporate finance series, Colliers International addresses questions about corporate lease accounting changes following last summer’s release of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) joint task force’s Lease Accounting Exposure Draft. Due to a delay in the new standard issuance, questions plague the real estate industry, including when the final rules will be released, what date the proposed standards will take effect and what steps can be taken now to prepare for the changes. The lease accounting changes are being drafted to increase the transparency within corporate financial statement reporting and enhance the comparability of similar companies and like transactions. The goal is to create a common lease standard to ensure assets and liabilities arising from lease contracts are uniformly recognized within corporate financial statements. According to the FASB/IASB boards, deliberations surrounding the lease accounting Exposure Draft are ongoing and should be completed during the third quarter of 2011, with a revised exposure draft publication shortly thereafter. Therefore the timing for implementation will be delayed as well. Colliers advocates a strategic approach to the current corporate financing determination. Today’s decision-drivers must fully incorporate the most likely lease accounting precepts. By proactively understanding such factors and incorporating the prospective rules into the lease-versus-buy decision matrix, your company will intelligently influence real estate decisions that will have a lasting impact on

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CORPORATE FINANCE SERIES

Corporate Lease Accounting #6 AT ISSUE: The threat of imminent corporate lease accounting changes has been lingering for the past eighteen months, certainly since well before the FASB/IASB joint task force issued its August 2010 Exposure Draft. Today, the most common questions are: > When will the new rules be finalized? > What will be the final resolution of the most controversial Exposure Draft elements? > What are the expected effective dates of the proposed new standards? > What should we do now to prepare for the new rule changes? If recent history is any indication, nobody can predict with absolute certainty the answers to any of these questions. We can, however, provide a summary of recent discussions and guidance for corporate executives and real estate service providers. REVIEW OF FASB / IASB OBJECTIVES: It is important to remember the general reasons behind the lease accounting changes: > increase the transparency within corporate financial statement reporting; and > enhance the comparability of similar companies and like transactions. The FASB and IASB endeavor to create a common lease standard to ensure assets and liabilities arising from lease contracts are uniformly recognized within corporate financial statements. Assets shall be classified based upon a corporation’s right-to-use the leased property, whereas lease liabilities shall be classified based upon a corporation’s obligation to pay rent.

The joint FASB/IASB task force is attempting to eliminate the existing SFAS13 “bright line” tests, which currently provide a roadmap for lease classification and allow for financial engineering by corporations. THE NEW JOINT TASK FORCE’S COURSE OF ACTION: The FASB and IASB received substantial constructive feedback on its original August 2010 Exposure Draft. The result has been a material course correction on certain conspicuous elements of the Exposure Draft, including definition of “lease term,” landlord capitalization requirements and accounting for certain contingent rentals, to name a few. Please note that NO elements of the new proposed rules have been codified. As such, all elements of the proposed new lease accounting rules are subject to further change, adaptation and re-adaptation. Colliers has received feedback that the Exposure Draft has been substantially modified from its original version. In fact, the FASB/ IASB boards have publically stated that deliberations surrounding the lease accounting Exposure Draft are ongoing and should be completed during the third-quarter 2011, with a revised exposure draft publication shortly thereafter. This type of delay and revised approach is not uncommon for the board. Most recently the FASB realized a similar fate relative to its Revenue Recognition standards. In that case, the task force reissued its exposure draft to incorporate the substantive changes resulting from public comments and further review of the standards application. In any event, we know for certain that the full new standard publication will NOT occur this summer and the timing for implementation will be delayed well beyond the original expectation of FYE 2012.

1 of 2

the future capital structure of the company. While advocating a strategic approach to financing determination, Colliers recommends a cautious approach to investment in systems and technology. These new rules will definitely add complexity to the financial statement reporting process. In order to track lease obligations more effectively and allow corporations to efficiently implement lease accounting disclosure requirements, companies with many real estate and equipment leases will need to invest in systems and technology which are currently in formative stages. It is widely believed that the boards will provide ample time for recognition of the new lease accounting standards. Therefore, without a specific and detailed understanding of these final lease disclosure requirements, which will affect the coding and formulation of these systems, Colliers recommends careful consideration of capital commitments. Before investing capital and committing valuable resources in new systems, processes and technologies, Colliers proposes “procrastination” surrounding tactical implementation of the new lease accounting standards. To receive a full copy of the finance series report, email Bret Hardy, CPA, Executive Managing Director of Corporate Finance for Colliers International, at Bret.Hardy@colliers. com.

Parking Rates Hold Steady

The more things change the more they stay the same—at least when it comes to parking rates. According to Colliers International’s National Central Business District Parking Rate Survey, despite a general improvement in economic conditions, most parking garage owners and operators did not increase parking rates during the last 12 months. A handful of cities saw double-digit increases, but in most markets parking rates held steady, rose marginally, or dropped by just a few percent. According to the survey, the five most expensive parking districts (as represented by median rate) in the United States are Midtown Manhattan ($541.00), Lower Manhattan ($533.00), Boston ($438.00), San Francisco ($375.00) and Chicago ($289.00) per month. The five least expensive are Reno ($45.00), Phoenix ($50.00 USD), Bakersfield ($55.00), West Palm Beach ($56.00), and Memphis ($57.00) median rate per month. For more information, contact Chief Economist Ross Moore at ross.moore@colliers.com.

Colliers international fall 2011

spot l ig h t > Q&A

executive insight with:

Karen J. Whitt

U.S. President & Chief Operating Officer | Real Estate Management Services Colliers International Karen Whitt oversees Colliers International’s property management

team. Whitt ensures consistent service across the organization and collaborates with brokerage and investment sales professionals nationwide to provide integrated real estate solutions. During her more than 20 years’ experience in the industry, she has been a national leader in property management, handling office, retail and mixed-use for institutional clients, including TIAA, ING UBS, and Principal Financial. She is based in Washington D.C.

If you could have dinner with any business leader, who would it be and why? I’m on the road several days a week, so if I had an open dinner slot I’d choose to be home with my husband and thirteen-month-old baby, and invite Oprah Winfrey. She’s smart, she’s not afraid to take risks, and she’s genuine. I just wouldn’t tell her I didn’t watch her show.

Words to live by? Just do it...but do it right.

Who were your mentors? My first boss after college, Barb Kocmur of Janez Properties in San Diego, who showed me how to handle challenges with grace; Marc DeLuca of Clarion Partners, who taught me how to deliver value to clients (as he does every day); and Dylan Taylor, who exemplifies trust and integrity, and shows us that you can lead only if people follow you.

Favorite business book? Who Moved My Cheese? by Spencer Johnson. The value in this book for me is the reminder that everything is always changing, and you have to be innovative and stay ahead of the crowd.

What do you see as new industry trends to note? Property management organizations will become true partners with their clients, rather than just providing service. This may result in performance-based management fees to truly align the interests of clients and management firms.

What did you want to be when you were young? A teacher. Both my parents were teachers… and of course, I wanted summers off!

What was your first job? I was a lifeguard at the local pool. (Saved two kids in three summers.)

knowledge leader fall 2011

Biggest accomplishment so far in your career? Really, my biggest accomplishment is handling the day-to-day challenges, and making sure to enjoy the small victories.

Who is your role model? My mom. She taught me to think outside the box, never accept status quo and, most importantly, to put others first. Knowing there are many solutions has made solving problems much easier throughout my life.

How are you involved with your community? My husband and I have provided a foster home for more than 200 locally rescued dogs in addition to the four special-needs dogs that are part of our household. The animal rescue organization we work with, Lucky Dog (www. luckydoganimalrescue.org), provides adoption matchmaking and foster care in the Metro D.C. area. Last year alone, Lucky Dog kept 1,400 dogs out of high-kill shelters in the South. K L

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B2B

busin es s to busin es s tip s

Gas, Food, Lodging Much like oil and water, high oil prices and hotels simply don’t mix. By John B. Corgel, Ph.D., and Jamie Lane A report released by PKF Hospitality Research (PKF-HR) in Spring 2011 reveals a direct economic relationship between oil prices and the U.S. lodging industry. The special report, entitled Oil Prices and Lodging Risk, notes that the U.S. lodging industry will see minimal disruption if oil prices reach $125 per barrel in 2011. However, if prices surge to $150 per barrel, the recovery that U.S. hotels are currently enjoying could be severely curtailed. Since the U.S. lodging industry depends on

knowledge leader Fall 2011

the health of the macro economy to sell their products—guest rooms, food and beverage services and meeting rooms—oil prices should be a serious concern for hotel managers, investors and developers. “As the price of oil has shot up and then down over the past few months, many U.S. hoteliers have worried about the impact that oil prices could have on their business,” notes R. Mark Woodworth, president of PKF-HR, an affiliate of Colliers International. “Our analysis found that when oil prices increase beyond

normal levels, individual consumer and business spending power is reduced, which in turn has a negative multiplier effect throughout the economy in general and the lodging industry specifically. Based on our study, oil prices above $125 a barrel exceed ‘normal’ levels and would have an increasingly negative effect on hotel operating performance.” The PKF-HR’s Hotel Horizons® econometric demand model relies on economic data from Moody’s Analytics to project future hotel demand levels. In describing the microeconomic knowledge-leader.com

ANNUAL CHANGE IN REVPAR

OIL PRICE IMPACT ON U.S. LODGING INDUSTRY REVPAR FORECASTS 10% 8%

8.9% 7.1%

5.5%

4.6%

5.0%

4% 1.9%

2% 0%

2011F

2012F

March 2011 Hotel Horizons® Baseline Forecast $125 Oil Price Scenario $150 Oil Price Scenario SOURCE: PKF HOSPITALITY RESEARCH

effect of oil prices, Moody’s states: “The most visible channel through which higher crude oil prices affect the U.S. economy is higher transportation costs. An increase in crude oil prices raises the price of gasoline and diesel. Higher crude oil prices also raise the cost of heating oil and propane, which are used by households in the Northeast and Midwest to stay warm during the winter. When petroleum prices rise, consumers have less money to spend on other goods or services, save, or pay down debt. Every $1 increase in the price of crude oil raises gasoline prices by 2.2 cents per gallon and cost consumers about $3 billion over the course of a year.” Another cause for concern for the industry is the continued threat of political instability in oil-producing nations that could constrain supply, and increased demand from developing nations emerging from the global recession. Concerned with the direction of oil prices in April 2011, Moody’s created two economic knowledge-leader.com

forecasts in which oil prices increase to either a high of $125 or $150 by the fourth quarter 2011. The baseline scenario ($98 per barrel for 2011) reflects Moody’s modeled fundamental price of oil ($93.53) coupled with a premium of approximately $5 to account for the supply uncertainty. This baseline scenario also assumes the Libyan conflict will be resolved over the course of the year. According to Moody’s Analytics, a surge in the price of oil to $150 per barrel would trigger a mild recession, which is traditionally defined as two successive quarters of negative gross domestic product (GDP). In the $150-per-barrel scenario, Moody’s forecast of real GDP growth falls by a maximum of 2.6 percent, resulting in the loss of 4.5 million jobs by 2012. The econometrically-based Hotel Horizons® demand model relies primarily on changes in real personal income and total payroll employment. By introducing Moody’s oilspike scenarios for economic growth into these models, the next five years begin to look vastly different.

Revenue per available room (RevPAR) gains observed in the beginning of 2011 will not continue in either of Moody’s oil-price-spike scenarios. These high oil prices have the potential of halting the economic recovery; given lodging’s dependence on macroeconomic health, the report expects declines in economic production to flow through to lodging demand. In the $150 per barrel scenario, the 2 percent RevPAR increase in 2012 will be entirely driven by a 2 percent increase in demand as average daily rate (ADR) levels remain flat. As inflation powers forward, ADR fails to keep up, which results in real ADR declines. This trend is generally seen through all types of locations and chain scales. PKF tested which location segments are more susceptible to an increase in oil prices. Historically, oil prices have had a 99 percent correlation with gas prices and, since hotels are travel destinations, one could assume an increase in the price of getting to the destination could potentially decrease demand. Not surprisingly, hotels with drive-to business, including interstate, suburban and resort hotels, may see the first impacts of increased oil prices. Declines are then expected to migrate to fly-to resort locations once other hedging strategies— including taking the train or reducing other vacation expenditures—run out. To test this theory, PKF inserted Moody’s $150 oil price scenario into models for each location. The results show the average RevPAR change for 2011-2012. The two bars for each location represent the baseline forecast (blue) contrasted with our hypothetical $150 oil price scenario forecast (red). The location segment expected to see the bulk of the damage is resort, where RevPAR could fall from an average increase of 12.3 percent down to 3.7 percent. These results confirm that location segments exposed to leisure/destination travel demand could see the largest declines in future growth. As long as oil prices continue to stay high, they remain a concern and warrant continual monitoring. While the scenarios presented above have a low probability of occurrence, many of the drivers will have a greater influence in our models as situations abroad unfold. To download a complimentary copy of the Oil Prices and Lodging Risk report, visit www. pkfc.com/oilpricesandlodgingrisk. K L Colliers international Fall 2011

working space

sm a rt d esig n fo r t h e wo rk pl ace

As New York’s energy needs spiked this summer amid one of the worst heat waves on record, David Kuperberg, CEO of FS Energy, knew that a good portion of that energy was simply being wasted. The founder and CEO of Cooper Square Realty (a FirstService Corporation subsidiary and the largest residential property management company in New York City), Kuperberg says he has documented that many of the city’s buildings are terrible energy hogs. For the good of the environment and the good of his customers, he wants to make buildings more energy-efficient. According to the Green Building Council, buildings in the United States are responsible for producing 39 percent of the nation’s greenhouse gas emissions. The average building’s energy consumption also accounts for as much as 25 percent of a building’s annual operating expenses. “When you put those two figures together, it’s clear that reducing emissions by reducing energy consumption is the way to go,” Kuperberg says. “As property managers, our goal is to increase asset values for our clients. In this economy, one of the best ways to do that is by reducing operating expenses. By reducing consumption, we reduce costs and greenhouse gas emissions; that will increase asset values.”

Changing an Industry

David Kuperberg

Conservation’s Silver Lining FS Energy is championing the cause of energy conservation and helping the real estate industry evolve in the process. By Jeff Bond 12

knowledge leader fall 2011

Together with the management team at FirstService, Kuperberg began developing a plan to change some of his clients’ resistance to retrofitting their properties for greater energy efficiency—which soon grew into a more comprehensive initiative to champion the cause of conservation in the real estate industry. According to FirstService President and Chief Operating Officer Scott Patterson, saving energy, cutting costs and reducing a company’s carbon footprint was simply the right thing to do. “We saw it as a responsibility,” Patterson says. “Through our Residential Management division and Colliers International, we are by far the largest manager of properties in North America and are in a unique position to impact energy consumption in the built environment. We needed to act on it.” From these initial discussions was born in 2008 FS Energy, a division of the property knowledge-leader.com

management leader that aims to cut building emissions through retrofits, equipment upgrades and maintenance changes. New York City was the first city in North America to roll out the new plan, starting with the approximately 450 buildings that Cooper Square oversees. The immediate goal for the energy division is to reduce energy costs and consumption in its New York properties by 25 percent by 2013. Such a reduction would save more than $30 million for FirstService clients and reduce carbon emissions by up to 111,000 tons— equivalent to taking 110 buildings offline or removing nearly 22,000 cars from New York’s streets. Patterson stresses that the company isn’t focused on making money from this initiative. In fact, the development of the new division has actually cost the company time, money and manpower. But he believes it is the right direction—one that will bear fruit for the company and its customers in the future.

Developing a Database The first step toward this goal was to create a unique database of detailed information on every building’s current and historical energy consumption, which can be used to identify both strengths and weaknesses in a building’s energy usage. With this database, FS Energy can accurately compare the energy usage across its entire management portfolio. So far, the division has given Energy Report Cards which list energy usage to more than 350 of its properties. “We aren’t in a position to make decisions for the buildings’ owners,” Patterson says. “But, as the knowledge leaders in this area, we are in a position to put forth the facts to our clients and help them realize the potential savings.” Kuperberg says this benchmark information

shows building owners how much they are paying for energy compared to similar buildings next door or down the street. And he notes that the largest potential for reducing energy consumption is in retrofitting buildings, most often by replacing old and inefficient equipment with newer products. However, the menu of energy-saving retrofits is long and includes some very simple fixes. So far, FS Energy has helped improve energy efficiency through the implementation of 26 separate projects. Energy-saving measures have included everything from replacing a building’s heating and air-conditioning system to developing cheaper procurement and maintenance systems to upgrading lighting systems. The division’s unique combination of skills in procurement, negotiating contracts and retrofitting properties has saved their clients millions of dollars in just the first few years. FS Energy helped New York’s famed Plaza Condominiums save more than $500,000, which will be realized over a two-year period. Another property, University Towers, has already seen cost reductions of $200,000 per year, and FS Energy was able to save St. James Towers more than $330,000. To no one’s surprise, many buildings in New York are extremely energy-inefficient, relying on old equipment or even steam from the city’s electricity generating plants to heat the properties. Tenants of such buildings have no control over the temperature in their units. “In many buildings in New York, the thermostat is literally your window,” Kuperberg says with a laugh. “You have to open the window to let in cooler air to adjust the temperature in your apartment. Some of the buildings are so energy inefficient that energy savings projects produce investment returns over 20 percent.” In fact, some basic fixes, such as upgrading

Some basic fixes, such as

upgrading a building’s lighting system, can pay for themselves in energy savings in less than one year.

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a building’s lighting system, can pay for themselves in energy savings in less than one year. Another popular measure is to convert dirty oil-heating systems to gas. The City of New York is promoting the conversion by passing ordinances restricting certain types of oil-heating systems. Following FS Energy’s example, city officials passed Local Law 84, requiring buildings to benchmark their energy usage and enter the results in the Environmental Protection Agency’s Energy Star database annually.

Changing the Status Quo While the initial cost of some of the retrofits is not inconsequential, FS Energy has worked out three different options for paying for the retrofits that shouldn’t cost tenants a dime and would save building owners money in the long run. The first option is for a building’s ownership to pay for the upgrades out-of-pocket and then collect the savings. The second is for ownership to take an unsecured loan from one of the banks that FirstService has made an agreement with to help fund these projects. The banks are paid back with the energy savings resulting from the retrofits, and the building’s tenants don’t pay any extra fees. Kuperberg says that in many cases such loans are paid off in only a few years. The third method is only available to certain properties and requires FS Energy to actually pay for the retrofit. The company would pay itself back with the resulting energy savings. In this age of enlightened environmental awareness, FS Energy’s idea of retrofitting properties at no cost would seem like a no-brainer. However, Kuperberg says he still struggles at times to talk building owners into making the necessary changes. Ironically, their attitude is that the deal is too good to be true. But he says attitudes continue to evolve and an increasing number of property owners are seeing the light. “The most important thing people should realize is that it pays to be energy-conscious,” Kuperberg says. “And I’m not talking about just tangentially by attracting more tenants. I’m talking about saving money. The bottom line is buildings can do well financially by doing good.” K L Colliers international fall 2011

Bank Notes

Co m m erci a l Fin a n cin g N e ws

Pass or Fail

Governments are putting their banks through a series of stress tests. But is it enough to ward off another financial crisis? By KC Conway

Following the collapse of Lehman Brothers

in 2008, the United States Federal Reserve began to put the nation’s top 19 financial institutions through a series of economic and credit stress tests known as the Supervisory Capital Allocation Program (SCAP). These tests are an effort to create a firewall against an advancing financial crisis. As the commercial real estate (CRE) risk specialty officer to the New York Federal Reserve at the time, I was engaged in these tests and, more recently, have been teaching CRE stress testing to bank examiners in advance of what will become an annual event for both U.S. and European banks. I believe stress tests will become the modern-day symbol that a financial institution is well-capitalized—much like the FDIC insurance logo did after the Great Depression. Without a passing grade, a bank will likely find it difficult to attract capital for expansion, and its lending activities will be constrained. In December of last year, U.S. banks submitted their “capital plans” which updated the results of the original 2009 SCAP. All but one of the original 19 institutions—Bank of America—was deemed well-capitalized and cleared to increase its dividends. As a result, the largest U.S. banks have been drawing down their loan loss reserves into earnings to pay higher dividends. It has been an egregious draining of the TARP money out of the banks while the housing and mortgage crises have worsened. It’s hard to understand how the December 2010 updated U.S. bank stress tests could justify such a release of the allowance for lease and loan losses (ALLL), calling into question the integrity of these subsequent stress tests. In the spring of 2010, Europe embarked on a much broader and more comprehensive stress14

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testing exercise of 91 banks in 20 countries. And in the past six months, both the U.S. and Europe have put banks through a second round of stress tests. In Europe, the latest tests revealed: •

•

A total of eight banks failed or fell below the capital threshold of 5 percent, with an overall shortfall of $2.5 billion (EUR) or $3.5 billion (USD). As many as 16 more European banks will need to bolster capital after their core Tier 1 ratio dropped below 6 percent— or just above the assessment’s 5 percent pass-mark. The failing banks were located predominantly in Spain (five) and Greece (two).

Australia had one bank miss the 5 percent core Tier 1 capital ratio. Europe is considering a TARP-like program that would inject as much as one trillion Euros to insure deposits in all EU banks except those in Greece, Portugal and Ireland. The intention is to create a firewall to contain the spread of the sovereign debt crisis—much like the U.S. did with TARP—making the bailout palatable to Germany, which has opposed any more support for Greece. Stress tests assess the impact of movements in relevant economic variables (gross domestic product, unemployment, home prices, etc.) on the liquidity and credit quality of a bank’s knowledge-leader.com

Stress tests assess the impact of

movements in relevant economic variables on the liquidity and credit quality of a bank’s assets.

assets. And, in turn, the impact on a bank’s capital position can be measured to determine if it holds sufficient capital to weather a storm. This process relies on one huge assumption: that the banks are able to provide sufficient line-of-business and loan-level detail to subject the bank’s assets to sensitivity analysis. The objective of the stress tests is threefold: •

•

Psychological: Stress tests were created primarily to calm the markets and convince the public that more Lehman-type failures or 1933-style banking crises were not looming. Equalizing: Prior to the SCAP, the U.S. and European banks had never been analyzed across a myriad of metrics simultaneously under a uniform set of economic scenarios. The stress tests were designed to correct this regulatory failing. Corrective: Stress tests were designed to identify how much capital a large financial institution might need if the U.S. or Europe remained in a recession over a protracted period of time, as well as how much capital would be needed to create a firewall to halt an advancing financial crisis.

From a macro-level perspective, stress tests have succeeded in meeting these objectives. The market has rebounded, and banks have not closed or failed at anywhere near the pace between 1930 and 1933 or the savings and loans crisis of the late 1980s. The question is, however, do we have fewer bank failures today because of stress testing, or are the stress tests masking the true underlying problems in our banking system? The answer lies in a deeper understanding of what is going on behind the scenes in the banks and with the regulatory process. knowledge-leader.com

A majority of U.S. banks still struggle to roll up loans within lines of business and across geographies to then stress them to sensitivity analysis. During the 2009 SCAP, it was an arduous process to collect line-of-business and loan-level information from banks in order to conduct a consistent stress test. It is a common misconception that the regulatory community knows all that is going on in a bank because of its routine onsite exams; or that the banks provide granular data on their loans and operations through what are known as “call reports.” In my opinion, the regulatory community did an atrocious job of monitoring the banks in the decade leading up to this financial crisis. They allowed CRE concentrations, for example, to explode without appropriate enhancements to risk management practices or additions to capital. And they failed to assess bank’s IT systems to ensure banks were capable of conducting line-of-business and loan-level sensitivity analysis on an electronic, rather than manual, platform. As a result of this regulatory failing, and the data deficiencies highlighted in the original SCAP, an interagency data collection effort was initiated in 2010 to assess banks’ capabilities for providing more detailed and consistent loan-level information for future stress tests. It was an eye-opening experience for the Board of Governors and heads of the OCC and FDIC to realize how little information the bank “call reports” provide—and how much a manual process it still is for banks to capture basic information needed to calculate a probability of default (PD) and loss given default (LGD). The absence of sensitivity analysis conducted by banks at loan origination, and subsequently during the life of the loan, is shockingly poor. Today, as I teach CRE stress testing to bank examiners and bankers, I remind them that stress testing is really all about determining the adequacy of bank capital. It should be a systemic

part of a bank’s risk management practices, not a regulatory mandate. And the process needn’t be complicated or expensive. Stress testing starts with an assessment of the availability, accessibility and accuracy of information. It then involves identification of the resources within the bank that have the skill and independence to assemble and analyze the information to make a forward-looking judgment about the adequacy of a bank’s capital to withstand market volatility. The key to the whole process is familiarity with what information is available, how it is accessible, and if it is timely and independent. The process can be as simple as identifying the 20 largest loans in the bank that account for 100 percent of the bank’s Tier 1 capital and subjecting only those loans to a series of sensitivity analyses. Or it can be as easy as requiring a sensitivity analysis at the end of an externally prepared appraisal of the two or three most influential variables in an asset’s valuation, and then electronically capturing them into the ALLL forecast process. Stress testing should be mostly about common sense and prudent banking practices, but it has become cover for the regulatory regime to diffuse their failings in the decade leading up to the financial crisis, and justification for paralyzing regulation. The objectives of the stress tests have been mostly psychological to date, in an effort to calm the market. However, they are moving in a direction that will become more substantive as line-of-business and loan-level data collection from the banks improves and becomes more automated. All we need now is a logo to display in bank windows adjacent to “FDIC Insured” that says, “Stress Tested with a Well-Capitalized Rating.” K L Executive managing director of real estate analytics, prior to joining Colliers International, KC Conway was the commercial real estate risk specialty officer for the Federal Reserve. Colliers international Fall 2011

London Bridge Is Going 16

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Londonâ&#x20AC;&#x2122;s skyline is changing dramatically thanks to a tower of glass known as the Shard. By Ruth Bloomfield

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The Shard is the centerpiece of the £2 billion mixed-use development, London Bridge Quarter.

When millions of international athletes and spectators

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descend on the United Kingdom next summer for the 2012 Olympics, the famous skyline of London will have a new global landmark for them to admire. The Shard, a narrow and elegant glazed tower, is Western Europe’s tallest building, and has become a source of some fascination to Londoners. Its allure is partly its sheer scale: at 1,016-feet tall and the equivalent of 95 stories high, The Shard is breathtaking by U.K. standards. Also, it’s designed to be an iconic public building, already being described as London’s answer to Paris’ Eiffel Tower or New York’s Empire State Building. Finally, there’s the rarity value. The recession has put a series of other major developments in the City on ice, yet during the worst of economic times The Shard defiantly continued to rise. In fact, The Shard is the centerpiece of the hugely ambitious £2 billion (approximately $3.26 billion U.S.) mixed-use development, London Bridge Quarter (LBQ). The tower itself will house a five-star Shangri-La hotel and spa, office space, restaurants and exclusive apartments. It is estimated that approximately 12,500 people will work at London Bridge Quarter when it is complete. The LBQ project also includes a new 10,000-square-foot public piazza, a redesigned and expanded London Bridge Station and bus terminal, and a 17-story, 600,000-squarefoot headquarters building named The Place. Like The Shard, The Place is designed by renowned Italian architect Renzo Piano, recipient of the Pritzker Architecture Prize, the American Institute of Architecture Gold Medal, the Kyoto Prize and the Sonning Prize. Piano’s other renowned designs include the Centre Georges Pompidou in Paris; the New York Times Building in Manhattan; the Menil Collection in Houston, Texas; the Kansai Airport in Osaka, Japan; and the Modern Wing of the Chicago Art Institute. The man behind the London Bridge Quarter is selfmade property developer Irvine Sellar. His involvement in London Bridge’s reinvention began pragmatically, with the purchase of an investment property in the area, the Southwark Towers—a bland 1970s building, at the time leased to accounting firm PricewaterhouseCoopers. Initially, he had no grand design to erect a record-breaking tower; in fact, he was attracted to the site specifically because it had a long-term quality tenant. Colliers international FALL 2011

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fell silent—including high-profile skyscraper projects with nicknames like the Helter Skelter, the Cheese Grater and the Walkie Talkie. But Sellar pushed on. As a result, he is currently in the enviable position of launching two landmark buildings at a time when there is a grave shortage of Class A office space in one of the world’s most attractive business locations. The Shard is already attracting interest from a wide range of potential occupiers, both domestic and international. Part of its appeal is that it will be multi-let, and occupiers will be able to lease as little as 4,000 square feet of space to as much as 200,000 square feet. Sellar believes the lower, larger floors with 33,000-square-foot floor plates will appeal to multi-national companies such as financial services or energy-related businesses; the upper floors will attract a diverse range of occupiers, from media businesses and hedge funds. The Place, meanwhile, is seen as a perfect prestige headquarters building. The future tenants of London Bridge Quarter will also be able to take advantage of some major improvements to the already bustling transport hub. Network Rail, the body which runs the U.K.’s national public transport network, has just applied for planning consent to rebuild London Bridge Station itself, which, combined with the new concourse being constructed by

Sellar, will elevate the station to the highest standards of international transport design to cater to the 54 million passengers that flood through every year. If its proposals are approved—and it is almost inevitable they will be—then the five-year project will start in 2013 as part of a £5.5 billion plan to enhance the efficiency of mainline train services which thread from the station and across South East England. London Bridge is also served by 15 bus routes and two subway lines, with speedy links to the West End and the City, London’s central business and financial district. Piano has described The Shard as a “vertical city” because its unique mix of offices, homes, hotel, spa and shops means that residents and workers need barely leave the site, whether they want a cocktail, a coffee, a facial or a new pair of shoes. But the truth is they may want to, as the formerly industrial stretch of the South Bank between London Bridge and Waterloo has been undergoing an extraordinary renaissance since the millennium. Growing up in north London, Sellar was always aware of London Bridge, but admits there was little reason to go there during his formative years. “Of course I knew the area. Everyone knows London Bridge, it’s a global address—one of the brand names of London,”

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p h o t o s © s e ll a r g r o u p

But then the U.K. government—usually highly resistant to modern design in historic areas—made it known that it would be amenable to high-quality, high-density projects near transport hubs. The concept of the London Bridge Quarter was born. To build The Shard as a linear development would eat up around 30 acres and be monstrously expensive. The solution, decided Sellar, was to build upwards. He decided to give Piano his first U.K. commission because he was impressed by his international body of work. Inspired by the 18th century landscape paintings of Italian artist Canaletto, Monet’s paintings of the Houses of Parliament, and the masts of tall ships that once plied the Thames, Piano’s design was approved in 2003 by the U.K.’s former deputy prime minister John Prescott, who proclaimed the project architecturally “exceptional.” Funding was then secured from a consortium of Qatari banks, and the project became a truly international venture: the work of a British developer, an Italian architect, Middle Eastern financiers, and Dutch company Scheldebouw, which supplied countless unique panes of glass. In 2008, however, Lehman Brothers collapsed and London plunged into a property meltdown. Building sites all over the capital

The Shard has been described as a “vertical city” because of its unique mix of offices, homes, hotel, spa and shops.

he said. “But it was more of an industrial area, like much of the Thames at that time.” That reputation has changed significantly, and South Bank is now regarded as one of the cultural hearts of London. The Tate Modern, housed in a former power station, is now probably the United Kingdom’s leading contemporary art gallery, attracting millions of visitors each year. In fact, it has become so popular that it is currently in the throes of a major extension which will see an extraordinary pyramid-shaped annex by the architect Zaha Hadid built beside it. The Menier Chocolate Factory is becoming one of London’s leading “Off Broadway” theaters; and Borough Market, once a dirty warren of wholesale stalls, is now an absolute treat for gastronomes, stuffed with charming cafes and stalls full of artisanal produce which can be bought direct from the farmland of England. And if this were not enough to tempt occupiers from traditional office locations in the West End and the City, once The Shard and The Place are complete, Sellar has his eyes firmly set on adding to the nascent London Bridge Quarter. “We have other properties here and we will extend London Bridge in ways which will complement what we have already done,” he says. “It is the nucleus of a new district of London.” K L knowledge-leader.com

Mark McAlister, head of City Agency for Colliers International in London, likens the launch of London Bridge Quarter to another “new” business quarter, Canary Wharf—now approaching its twentieth anniversary. Like London Bridge Quarter, Canary Wharf is a magnet for international business, and originally had as its centerpiece a landmark tower: One Canada Square. The Shard dwarfs the 770-foot One Canada Square, but McAlister believes London Bridge Quarter has something more important over Canary Wharf: location. LBQ is much closer to both the City and the West End and is already blessed with a great infrastructure. In fact, even without a landmark building, the South Bank is now exerting a pull on major companies. “The tenants already benefiting from the South Bank renaissance include Time Warner, Shell and PWC. So The Place and The Shard represent the final piece in the puzzle,” notes McAlister. “All major corporations will consider these buildings, and with total occupancy costs much lower than the City and West End, such relocations will be good value. For Canary Wharf tenants they can save themselves the extra commute, conservatively estimated at 30 minutes a day.”

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Ontarioâ&#x20AC;&#x2122;s Perimeter Development is transforming the urban landscape of suburban communities with projects like Breithaupt Block in Kitchener, shown before (opposite page) and after, as a computer-generated rendering (this page).

Out with the New, In with the Old. In Ontario, developers are revitalizing outlying communities by renovating historic buildings and reviving neighborhoods. By Sarah Eadie and Cheryl Reid-Simons

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Like a homeowner

E xteri o r ph o t o : L arry W illiams o n

pulling up outdated shag carpeting, only to discover gorgeous hardwood flooring hidden beneath, Perimeter Development has unearthed some remarkable treasures while restoring buildings and redeveloping communities. Of course, turning an early 20th-century manufacturing building into a high-tech industry office space is a little more complicated than simply pulling out a few carpet staples. Consider Perimeter’s Breithaupt Block project in downtown Kitchener, Ontario, for example. “We’ve taken out 1,200 tons of heavy machinery over the past year and a half and we’re now in the process of going in and sandblasting all the walls, putting in new windows and mechanical systems,” explains Perimeter’s Chief Executive Officer and Founder David Gibson. “You can now see the bricks and beams, which are all made of Douglas fir. You can’t build with materials like that today.” Turns out, all those buildings that once manufactured car parts and rubber soles have a lot of soul of their own. And they’re helping to

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revitalize the hearts of downtowns in Waterloo Region because the same people who want innovative, new in-city office campuses also want to stay there when the sun goes down. “With everyone being very concerned about the cost of energy and the amount of time spent commuting, people want to work, play and live in their own neighborhoods,” Gibson notes. “It’s a complete 360 over the past 35 or 40 years.” Kitchener was founded as a manufacturing hub, explains Rod Regier, director of economic development for the city of Kitchener. “It’s full of these older Victorian industrial buildings that are three, four and five stories with high ceilings, large windows and just tremendous ambiance,” Regier says. “You could replicate it, but nobody would anymore. It’s an expensive form of architecture now, and it’s not being produced in suburban office parks.” Regier explains that, as the value of the Canadian dollar surged, manufacturing took a hit. Add to that the growth of suburbs, and things were grim in downtowns like Kitchener’s. “Our downtown took a beating in the 70s and 80s when people moved out to the suburbs,” he says. “Today we’re seeing a strong new market for urban living. A lot of young, creative knowledge-industry workers want to live downtown. They want to be in the coolest place there is, and that’s downtown.” New demands for unusual and funky, urban spaces have opened the doors for developers like Perimeter, who are looking to convert old structures into office or residential spaces. Gibson says an office in an old tire plant simply looks more interesting than one built from scratch. “The it-factor is the thing that generates a lot of money,” he says. Gibson founded Perimeter Development in 2009 after 20 years as CEO and president of FirstGulf, an office, commercial and industrial developer. “I tried retirement for three months. It wasn’t for me,” he explains. The company focuses on projects just outside—or on the perimeter—of the greater Toronto area. “The idea is to be nimble and quick. We’re able to make a decision happen quickly and this gives us an advantage over other companies who need Colliers international FALL 2011

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E xteri o r ph o t o : L arry W illiams o n

The bones (above, bottom) of the older buildings Perimeter Development is renovating are given a facelift (above, top) without losing their history or charm.

to go through boards, etc., to make decisions,” he says. “It also allows us to maintain a fun factor. Work should be fun. The less stress in life the better, and we make a point of having fun at Perimeter.” By focusing outside the metropolitan area, Perimeter also avoids some of the more aggravating elements of major market developments. “I really love the opportunity to work with all the municipalities,” he says. “It’s not like building in the City of Toronto where you’re competing with 30 or 40 other large developers. To now be the big fish in a small pond and really make a difference—it’s fun.” In addition to the Breithaupt Block project underway in Kitchener, Perimeter’s second major project in the works is in the Galt portion of the city of Cambridge in southern Ontario. The developer purchased seven properties along Main Street between Ainslie Street and Water Street with plans to upgrade 10 storefronts and 15 residential units. And while renovating an older, existing building isn’t cheap, it has its own rewards. “It takes a lot more work to save the better parts of the buildings,” Gibson

We’re preserving history—that’s very

rewarding.

Perimeter Development Chief Executive Officer and Founder David Gibson

admits. “But in Galt, they’re all made out of stone. They’re beautiful old buildings and you just couldn’t recreate that.” Gibson enjoys finding ways to work with existing structures, even though they will end up looking completely new by the time the project is over. “The real opportunity when we look at some of these older buildings is that you have the infrastructure in place already, in many cases it needs to be upgraded or expanded, but it is there so you’re not having to develop it from the ground up,” he says. That leaves more time and money available for the more creative aspects of development. “I love complex projects. I love mixed-use developments; they aren’t cookie-cutter like just doing industrial or just office space; each one is unique in its own way,” Gibson says. “Building mixed-use projects takes a certain expertise; not everyone can do them, and that’s why I like them.” Still, renovating an existing structure for a completely new use has more than its share of challenges, says John Lind, a broker with Colliers International in Kitchener. “They’re essentially putting mechanical systems into a building that was built when those systems didn’t even exist. Air conditioning? They didn’t have air conditioning when these buildings were built.” The sort of brick-and-beam redevelopment Perimeter is doing isn’t easy and doesn’t provide quick returns, Gibson acknowledges. “If you do it right, a lot of the payoff is not in the short or even medium-term.” And they don’t lend themselves to preleasing, either. “People can’t visualize what it will be when they see it in the raw state,” Gibson says. “The only way we can get the kind of rents we’re going to need is to have the first phase done. We’re not even going to begin any kind of serious marketing until the first phase is finished. When it is complete, that’s our marketing because people will be able to see the quality for themselves.” knowledge-leader.com

And if these developments seem to have a European flavor, that’s no accident. “Traveling extensively has definitely impacted and shaped my ideas,” Gibson says. “My interest is in cities and how they were originally created and designed. You can see what they are doing to re-create themselves, and how some have had to re-develop because of war or other factors. European cities do a great job of embracing the best of the past and the future.” And a lot of that has to do with the attitude of investors. “Places like Germany where you have great architecture, they traditionally have had a much longer view of real estate investment than investors in North America,” Gibson acknowledges. “In the past 15 years in North America, there have been more merchant builders (speculative builders) than long-term investors and that has impacted how we’ve built. We live in a very disposable society.” That long-term view is one of the things that make Perimeter so interesting to work with, says Lind. “Their deals are less about the structure of the cash flow and more about how that asset works in the community,” Lind says. “They come at it from a social standpoint. Other companies do that, too, but Perimeter takes it to a whole new level.” While preserving history is one of Perimeter’s goals, the company also looks to the future by supporting a green building philosophy. “We’re incorporating the right mechanical systems and building materials that not only work the best for our projects, but are also environmentally sustainable,” Gibson says. But probably one of the most environmentally friendly aspects of the projects, are their wellconnected addresses. “That’s something that we’ve really focused on: finding quality locations, close to newly proposed transit like Kitchener/Waterloo’s Light Rail Transit, GO Transit locations, and

other forms of transportation or major services,” explains Gibson. Located across the street from what will be a new regional transit hub, he says “the Breithaupt project is one of those key locations that we believe will be very attractive to the high-tech industry and other companies.” Waterloo Region has been aggressive in attracting high-tech and knowledge industries to its downtowns, including the University of Waterloo School of Pharmacy in Kitchener and the School of Architecture in Galt. Google, Research in Motion (maker of the Blackberry), and companies like OpenText have a sizeable presence in Waterloo, as well. The marriage of high-tech companies and renovated buildings constructed in an era when a vacuum cleaner passed for cutting-edge technology may seem odd, but it works. “High-tech businesses love these older buildings because they’re the type of building they can be very creative in,” Gibson says.” That’s helping bring historic town centers back from the brink of insignificance and giving developers like David Gibson a reason to keep going. “What wakes me up every morning is the excitement of making a difference,” Gibson says. “When I can go into the downtown district of a city like Galt which has been through tough times, and take a city block of seven to eight buildings, and redevelop them, creating a new retail mix—that is making a difference. And what we’re doing with Breithaupt—we’re not tearing it down, we’re preserving history— that’s very rewarding.” Perimeter plans on being in Waterloo Region for the long-term. “We picture ourselves as city builders,” Gibson says. “We are involved in all aspects of the community. In terms of charitable events, we support each other and our community. We are not there just to profit from the developments; we’re about creating a better community.” K L Colliers international FALL 2011

Business Partners When expanding into international markets, partner with local experts who have global networks. By John Wolcott In today’s shrinking business world, more and more companies are beginning to think and act globally. Before entering a new market, however, it’s wise to partner with companies that share your business’s philosophy and vision—local experts that can offer sound guidance and direction to help you succeed. Knowledge Leader sat down with executives of two companies that have formed such a partnership: DEXUS Property Group—a leading global real estate group with more than $14 billion in properties under management in Australia and the United States—and Colliers International, the leading integrated real estate brand in Australia. They shared why and how their relationship has succeeded at home and abroad.

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MALCOM TYSON, Colliers International Australia, National Executive Director and Managing Director, Industrial DEXUS was one of the first institutional property managers in Australia. They were established over 25 years ago and set about acquiring a national portfolio of properties with good quality tenants. Today, DEXUS is one of the largest companies of its type in the country. We at Colliers International began our relationship with DEXUS around 15 years ago, so our experience with the company goes back quite some time. Over that period, we’ve developed a good understanding of the way that DEXUS operates. We’ve focused on understanding DEXUS’s changing needs and requirements as the market changed, and bringing together the right people with the right skills to deliver on those requirements for them. That’s worked pretty well for us; they like dealing with our business and the services we provide. We’ve been the recipient of DEXUS’s annual leasing and transaction awards many times, which gives us a very good point of reference as to how well we’re supporting our relationship with them. In 2010, Colliers International took top honors at DEXUS’s annual Excellence in Agency awards, collecting both Industrial Agency of the Year and Transaction of the Year. DEXUS is very strong in office and industrial—their core areas—as well as retail markets. We worked with DEXUS here in Australia to design market strategies which have helped them take advantage of opportunities at times when others might not even have been active in the marketplace. For example, we assisted DEXUS in acquiring industrial property in the middle of the global financial crisis—the first real estate investment trust in Australia to do so. It turned out to be a terrific acquisition for them. That came about from a detailed strategy workshop with us that looked at opportunities in the market and evaluated them with respect to their objectives. Our long- and short-term forecasts were able to demonstrate where the market might be within three to four years’ time, which assisted DEXUS with their investment analysis. In the U.S., DEXUS is repositioning its national portfolio to progressively concentrate knowledge-leader.com

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investments along the West Coast where they see greater growth opportunities. We concur with these growth prospects. Having the caliber of people on the U.S. team like John Hollingsworth (Colliers International’s industrial leader for Los Angeles, Orange County and Inland Empire, one of the largest combined real estate markets in the world) is absolutely fantastic. It’s good to know that there’s a Colliers International office in Los Angeles that will welcome one of our clients like DEXUS and will develop a solid, long-term relationship with them like we have. We have a lot of respect for our colleagues in the U.S., and have learned from them as well. And DEXUS’s focus in the U.S. market further strengthens our relationship with Colliers International in the U.S. While DEXUS will be guided by the L.A. office of Colliers International, we also maintain contact with the company through Jane Lloyd, who heads DEXUS’s U.S. industrial investments. Before relocating to the U.S., Jane headed up the DEXUS retail business here in Australia, where she was managing a multibillion dollar portfolio and had a very different set of challenges. Our successful relationship comes from the synergy between two established companies. We understand each other, so we’re able to have a very transparent conversation. That allows us to provide DEXUS with another validation of their objectives, both in Australia and in the U.S. DEXUS and Colliers International share similar values and are very much alike: focused on customer service and a commitment to expertise. We work well together to deliver the right outcomes. That has helped us work through some challenging market conditions to achieve our goals. Our relationship with DEXUS is an excellent example of what Colliers International can do for clients, sharing information within our global network and accelerating their success. As more and more of our clients look to build their presence in new markets, we have applied the same growth strategies to accelerate their success. 26

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JANE LLOYD, DEXUS Property Group Managing Director, U.S. Investments DEXUS has a long history with Colliers International in Australia; we’ve built a strong partnership with them. Our partnership approach with agencies, tenant representatives and our corporate and capital partners is crucial to delivering superior results. Clearly, our aim in entering the U.S. market is to replicate the success of DEXUS in Australia and to have sustainable competitive advantage in our four key markets: SeattleTacoma, the I-880 corridor in San Francisco, the Port of Long Beach, and California’s Inland Empire in the fast-growing Riverside/ San Bernardino area. At one time, our U.S. portfolio—which we began acquiring in 2004—had included 21 markets, with 109 industrial properties totaling more than 27 million square feet and valued at $1.1 billion. In 2009, we began scaling that portfolio back to the 15 markets we have today. We redeployed our investments in the Midwest and on the East Coast so that we could focus on West Coast opportunities, specializing in business parks, logistics and distribution facilities. We’re seeing strong demand associated with the major ports of the West Coast as well as major industrialized areas. We’re focused on finding good opportunities in those markets and we have great teams with good, strong local market knowledge and great relationships—like our relationship with Colliers International— to source and close deals. DEXUS’s objective in the U.S. is to become a West Coast market leader in industrial real estate, so we are taking a rigorous and strategic approach to leasing. After closing out other U.S. investments, we will have approximately $600 million to invest in West Coast markets in the next few years. In Toronto, for example, we had only one property, so we contacted the Colliers International team there—Jim McIntosh and Bill Pitt—and told them we thought it was time to realize the value out of that asset to take advantage of other market opportunities. It was a great timing play and a very smart $78 million deal for us. knowledge-leader.com

DEXUS’s U.S. portfolio includes this industrial property located northeast of the I-10 and I-15 interchange in Riverside, Calif.

When we opened our office in Newport Beach, Calif., in June 2010, we knew that to succeed in a new market you had to have strong local market knowledge and a well-respected team. So we hired the experienced team of Master Development Co. (MDC). MDC had previously enjoyed a long and successful working relationship with the Colliers International team of Tom Taylor, Steve Bellitti and Josh Hayes, brokers based in Ontario, Calif. The eight team members of the MDC group form the nucleus of our present 21-person DEXUS team on the West Coast, all of whom are high-caliber real estate professionals. We were very keen to work with local experts. Malcom Tyson has worked closely with us on a number of leasing and asset transactions over the years in Australia. He’s very customerfocused and is always working to do the right thing for the best interest of his client. He has helped us with introductions and late last year, organized a presentation with a number of his colleagues. Following that, we closed a couple of great deals, including a 212,000-square-foot lease in Rancho Cucamonga. Malcom also took the initiative, flying over to visit our Southern California office. After listening to and discussing our plans for the

market, it was clear that he understood our business model and what we’re trying to achieve on the West Coast. There are three things about Malcom that stand out: he’s smart, knows the market inside and out, and is well-connected. The key thing about Colliers International in Australia and the U.S. is their level of professionalism. They are a large organization with a boutique view—which is obviously a valuable asset to bring to the table. The business backs up its strong brand and corporate presence with on-the-ground expertise and intelligence in each of their markets. That’s really crucial to driving value in our markets. They have been a great help recently in U.S. business. We have a global share registry. Although 60 percent of our investors are Australian, the remaining shares are split evenly between American and Asian investors. We’ve made an enormous amount of progress in building our business in the U.S. in just 12 months’ time. We started from a low profile in the U.S. but we had a strong brand in DEXUS, a strong balance sheet and great help from Colliers International. In that short space of time we’ve gone from “DEXUS who?” to people knowing who we are and understanding that we’re nimble and can close deals. K L Colliers international FALL 2011

Behind the Scenes

Credit Suisse’s smart investments include 1099 New York Avenue in Washington, D.C.

Swiss Notes

Daniel Tochtermann began his career as a

researcher at Wüest & Partner AG. Today one of the best-known real estate consulting firms in Switzerland, at the time of his hiring, it was a modest company. But his new employer gave him plenty of leeway and opportunity to excel, and in just three-years’ time, he was a partner in the business. “The field was open,” he recalls. “Real estate consulting wasn’t there. And seeing a need for certain resources, my partners and I published the first countrywide real estate market report. We also saw that valuation was outdated so we produced the first cash-flow model, which is still the market standard today. Innovation was the key to success.” His career evolved over the years, smoothly transitioning from research to valuation to consulting, strategy and transaction services—all the while delivering the stellar results both his firm and his clients desired. In 2004, Tochtermann decided it was time for another career move, and sold his stake in Wüest & Partner to join Credit Suisse, jump-starting his global career. His first orders of business were to establish a worldwide platform and begin to invest globally. Today, Credit Suisse Real Estate Asset Management manages US $45 billion in direct real estate investments in 17 countries from Sweden to Spain, Canada to Chile and Japan to Australia. Tochtermann, Global Head of Real Estate Acquisition and Sales, was the main person responsible for all investments outside of Europe. Tochtermann’s approach to his career and projects includes a willingness to take certain well-calculated risks. Recent transactions include a development project in downtown Vancouver, 28

knowledge leader fall 2011

British Columbia (which is designed to meet Canada’s highest sustainability standards), an office project in Santiago, Chile and a forwardfunding deal in Brisbane, Australia. He and his team also have a knack for timing markets correctly, as demonstrated by recent investments in such projects as 1099 New York Avenue in Washington, D.C., Boston’s Independence Wharf and London’s Earl Place Building. All these deals were done in the trough of the markets in 2009 and early 2010, immediately following the financial crisis. To date, the most successful transaction of Tochtermann’s career has been the joint acquisition of 78 Shenton Way in Singapore. Purchased for SG $348 million in 2007, the property sold for SG $650 million only 12 months later, generating an internal rate of return (IRR) of more than 80 percent after factoring in costs associated with adding a second office tower to the property. Risk assessment, timing, and facts and figures aside, Tochtermann also relies on certain intangibles when determining the validity of a venture. “The first thing I set out to know is whether I can trust the counterparty. It’s a matter of looking into each other’s eyes and doing a handshake deal. Deal security is not only about the money—it’s about finding people you can trust. Once you do that, it will be a great transaction, with both sides wanting to come to a successful closing. More importantly, you don’t waste time. Time and timing are always of the essence.” Credit Suisse Real Estate Asset Management plans to expand further in real estate—first in Europe, where they already have a prominent presence, then subsequently in the Americas and Asia, where they are looking to strengthen their reach.

“We can expand either organically or inorganically,” Tochtermann explains. “We can grow organically by taking on new clients, or inorganically by acquiring and integrating new companies—which I think is the best way to grow in North America and Asia.” As Credit Suisse plans for the future, Tochtermann sees several trends for the industry in the coming year. “We will see more consolidation,” he predicts. “Investors are becoming more sophisticated. They are looking for more transparency, and, in particular, for the best-in-class real estate investment managers with a proven track record who are able to manage property investments successfully in boom phases as well as in downturns. In addition, real estate regulations are changing. Both these factors will bring about consolidation. On the property side, we will see more sustainable buildings with older, non-sustainable buildings unable to compete in the leasing market in the long run.” Indeed, Tochtermann’s passion for real estate (a must-have, he says, for newcomers to the real estate industry) and forward-thinking approach to transactions have garnered him great success in the business. Contemplating his professional journey, he recognizes the role his superiors and teams have played in his achievements. “I always had excellent bosses who gave me the freedom to create, try new things and be entrepreneurial,” he acknowledges. “Trust from superiors, combined with one’s entrepreneurial spirit, is very important. I experienced both at Wüest & Partner, and continue to do so at Credit Suisse. And I always have had a great team. I’m only successful with my team.” K L knowledge-leader.com

new Yo rk Av enue B uildin g : © Eric Taylo r P h oto.co m .

Credit Suisse’s Top Real Estate Exec Continues to Innovate and Evolve. By Michelle Santos

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES

Brian Canfield Centre

FOR SUBLEASE

3777 Kingsway Burnaby, British Columbia

• Floors 15–21 • Fully improved floors • Average floor size: 16,311 SF • Total available area: 114,179 SF • Expansive views • Abundant on-site amenities • Close proximity to Skytrain

Rob Chasmar +1 604 661 0822 rob.chasmar@colliers.com Marco DiPaolo +1 604 661 0838 marco.dipaolo@colliers.com

FOR lease

Marine Gateway on Canada Line 8440 Cambie Street Vancouver, British Columbia

• Canada’s first LEED® Platinum high-rise office project • +/- 786,000 SF total rentable • 38 floors; average floor plate: 24,000 SF • Possession date for fixturing: Q2-Q3 2014 • Parking ratio: 1 per 2,100 SF • Estimated completion: 2014- 2015

Jim Rea +1 403 215 7250 jim.rea@collierscalgary.com Randy Fennessey +1 403 571 8762 randy.fennessey@ collierscalgary.com www.eighthavenueplace.com

Class A Office Building For Sale or Lease

FOR SALE OR LEASE

75 Tiverton Court Markham, Ontario

Sheldon Scott +1 604 662 2660 sheldon.scott@colliers.com Matt Saunders +1 604 661 0802 matt.saunders@colliers.com www.collierscanada.com FOR Lease

Build-to-Suit Opportunity 8645 Regional Highway 25 Milton, Ontario

• 483,482 SF of new construction at 32' clear height • Configurations starting at 200,000 SF • Ready-to-go site allows fast-tracked development • Existing rail to the site • Trailer parking and outside storage • Close proximity to Highways 401 and 407

Now Pre-leasing Eighth Avenue Place West Tower 585–8th Avenue SW Calgary, Alberta

Jason Mah +1 604 692 1460 jason.mah@colliers.com

• High-profile leasing opportunity on Cambie and SW Marine Drive • Large mixed-use with 800,000+ SF of building area • 220,000 SF retail component, anchored by a major theatre and grocery store • Estimated occupancy: end of 2014

FOR lease

• 78,776 rentable SF (vacant possession) • Impressive atrium lobby • Full fitness area, lockers, showers and squash court • Combination of open areas and private offices • Full-service cafeteria with walkout veranda • Ravine setting with Highway 404 exposure

Prestigious Industrial Property for Sale or Lease

Patrick Cowie +1 416 791 7223 patrick.cowie@colliers.com FOR sale or Lease

2130 Dagenais Boulevard West Laval, Québec

Colin Alves +1 416 620 2848 colin.alves@colliers.com www.collierscanada.com/3340

• Detached industrial property with multi-tenant capability • 57,335 SF of building area • 17,335 SF of office area • 40,000 SF of industrial area • 22 to 26 feet in clear height • Close proximity to Highways 15 and 440

Michel Boileau +1 514 764-2821 michel.boileau@colliers.com www.collierscanada.com/831

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES FOR lease

100,000 SF of New Office Space

984 West Broadway Vancouver, British Columbia

225 Commissioners Street Toronto, Ontario • Office space strictly for film, media, entertainment, communications or related uses • 12-to-18 month delivery time from lease signing • Direct bus from Union Station • Abundant parking • Part of a 2.4-million-SF, mixed-use, future development • Largest sound stage in North America on-site

Broadway and Oak

for lease

Tim Bristow +1 416 643 3408 tim.bristow@colliers.com Steve Keyzer +1 416 643 3770 steve.keyzer@colliers.com

• New LEED® Gold building • Main-floor retail, 9 floors office • Building naming rights available • Built by BlueSky Properties, a Robert Bosa Family Company • Decks on most floors • Windows that open • Efficient floor plates

www.collierscanada.com/764 FOR lease

Northport Business Park

Marco DiPaolo +1 604 661 0838 marco.dipaolo@colliers.com www.broadwayandoak.com

Sleep Inn Hotels (2 locations)

FOR sale

101 VFW Avenue Grasonville, Maryland

129 Avenue & 170 Street Edmonton, Alberta

406 Punkin Court Salisbury, Maryland • New, high-cube modern distribution / light manufacturing facilities • Ideal location in Northwest Edmonton offering 25,200 – 176,400 SF • Multi-building, master-planned industrial development with developer guidelines • Dock and grade loading • Yard storage trailer parking available

Rod Connop +1 780 969 2994 rod.connop@colliers.com Evelyn Stolk +1 780 969 3002 evelyn.stolk@colliers.com

FOR sale

737 N STILSON Boise, Idaho

David A. Dannenfelser +1 443 297 9034 david.dannenfelser@colliers.com Stephen C. Weiss +1 443 297 9004 steve.weiss@colliers.com

David Kraus +1 780 969 3026 david.kraus@colliers.com

Park River Apartments

• Price: $5,150,000 • Price unit: $56,600 • Rentable SF: 63,476 • Cap rate: 6.7% • Year Built: 1990 • Lot size: 3.6 acres • Units: 91

• (2) Sleep Inn hotels for sale • 137 total rooms • Historically consistent, positive operating history • Asking price: $8,250,000 ($60,219 per key)

North Rhett Commerce Park

FOR lease

5801 North Rhett Avenue North Charleston, South Carolina

Clay Anderson +1 208 489 6177 clay.anderson@colliers.com http://bit.ly/nXpW6V

• Best logistics location in Charleston • Over 10 acres of laydown yard • Served by CSX rail • 300.000 SF available • On-site dual-axle truck scale • Site includes 24/7 security with a fully fenced perimeter Hagood Morrison, SIOR +1 843 270 5219 hagood.morrison@colliers.com

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES FOR sale

Rite Aid Drug Store Portfolio Shafter, California; Selma, California; Fresno, California; Delano, California

• Priced at $24,498,000 • In place assumable financing • Double digit cash on cash return • Requires only $6,125,312 down payment • NNN lease with exception to roof, wall and structure • Excellent locations • Perfect for 1031 exchange buyers • Family trusts looking for preservation of capital and safe, secure income

Pinole Point Business Park 2900 Atlas Road Richmond, California

Christopher E. Maling, Senior Vice President +1 213.532.3292 chris.maling@colliers.com www.malingteam.com FOR Sale

Osceola Gateway US Hwy 192, just east of Seralago Blvd. Kissimmee, Osceola County, Florida • 450 acres of commercial land in Central Florida; 210 usable acres of uplands • Highest & best use – mixed-use development • Last large site near Walt Disney World and Major Highways • Close proximity to Disney World, SeaWorld, Universal Studios, Orange County Convention Center • Excellent traffic volume: 44,500 AADT

• 200,000 SF Class A warehouse/ manufacturing space • 7,800 SF office • ESFR sprinklers • 26' minimum interior ceiling clearance • 24 dock-high doors (rear loading) & 1 grade-level door • 205 truck trailer spaces with large yard area • Close proximity to Port of Oakland

San Melia Apartment Community

Greig Lagomarsino +1 510 986 6770 greig.lago@colliers.com Todd Severson, SIOR +1 510 986 6770 Todd.Severson@colliers.com FOR Sale

14435 S. 48th St. Phoenix, Arizona

Susan Morris +1 407 843 1723 susan.morris@colliers.com Kane Morris-Webster, CCIM +1 407 843 1723 KMW@colliers.com

• A+ Property constructed in 1998, renovated in 2011 • Located in exclusive submarket which boasts some of the highest multifamily occupancy rates & market rents in Metro Phoenix • Extensive resort-style amenity package • Excellent infill location with limited new development in area due to lack of available land

FOR sale

Sherwood Ice Arena

Class “A” Warehouse / Distribution Facility

20407 SW Borchers Drive Sherwood, Oregon

• 51,644 SF building on 4.71 acres • 16,284 SF of mostly leased commercial/retail spaces • Family Circle’s 2009 Ten Best Communities for Families • Includes sale of real estate and ice arena business • NHL regulation-size rink • Expansion opportunities • $5,500,000

FOR lease

Cindy Cooke +1 602 222 5039 cindy.cooke@colliers.com Brad Cooke +1 602 222 5088 brad.cooke@colliers.com www.collierscooketeam.com FOR sale & Lease

1780 Industrial Drive Stockton, California

Jon M. Rubey +1 503 499 0051 jon.rubey@colliers.com

• Building size: 111,160± SF • Divisible: 41,685± SF • Lot size: 6.43± Acres / FAR 39.7% • Office area: 1,345± SF • Clear height: 30'± - 32'± • Power: 2,000 Amps, 277/480 Volts, 3 Phase • Grade doors: Two (2) (12' x 14') • Dock doors: Twenty (20) (9’ x 10’)

Mike Goldstein, SIOR +1 209 475 5106 michael.goldstein@colliers.com Gregory O’Leary, SIOR +1 209 475 5108 g.oleary@colliers.com Greig Lagomarsino, SIOR +1 510 433 5809 greig.lago@colliers.com

Investment/Leasing Opportunities A SELECTION OF COLLIERS INTERNATIONAL AVAILABLE PROPERTIES

Located in Northern Kentucky

FOR lease

3100 Plaza Properties Columbus, OH

2100 Litton Lane Hebron, Kentucky • 195,000 SF +/- total space available • Over 60,000 SF +/- contiguous office space • Immediately adjacent to Cincinnati/ Northern Kentucky International Airport • Easy access to I-71/I-75 via I-275 • Numerous neighboring amenities • Renovation completed in 2003 • Crane Served: 7-7.5 Ton

The Zangmeister Center

John Gartner, III, SIOR +1 513 562 2207 john.gartner@colliers.com Erin Casey, GA-C, MCRE +1 513 562 2225 erin.casey@colliers.com

• Available spaces include: ambulatory surgical center; clinical, office and shell spaces • One of the most recognized medical buildings in central Ohio • 1,046,721 residents within a 20-minute drive • Retail pharmacy, physical therapy and state-of-the-art radiology on site

CincinnatiIndustrialTeam.com

Dallas Logistics Hub I & II

FOR lease

4800 & 4900 Langdon Road Dallas, TX

• Largest new logistics park in North America • Located near Union Pacific Intermodal Terminal & Planned BNSF Intermodal facility • 4800 Langdon: 150,000 – 321,123 SF; 32' clear height • 4900 Langdon: 25,000 – 151,900 SF; 28' clear height • FTZ, Triple Freeport • LEED® Gold Certified buildings

For Sale Las Vegas Boulevard Land

for sublease

Paul Heiserman +1 614 437 4497 paul.heiserman@colliers.com medicaloffices.blogspot.com/

Amway / Distribution Facility

FOR sale

5101 Spaulding Plaza Ada, Michigan

Tom Pearson, SIOR +1 214 217 1277 tom.pearson@colliers.com Chris Teesdale, SIOR +1 214 217 1233 chris.teesdale@colliers.com FOR sale

• 791,148 SF (617,814 whse/172,334 office) • 101 acres • 7" very flat floor • 40 docks • 36' clear height • ESFR system • Expandable by 200,000 SF • Potential rail

The Brockman Lofts

Duke Suwyn SIOR, CCIM +1 616 581 7777 duke.suwyn@colliers.com John Kuiper SIOR, CCIM +1 616 901 3500 john.kuiper@colliers.com for sale

530 W. 7th Street Los Angeles, California

Las Vegas Boulevard Las Vegas, Nevada • 100-acre parcel located on the Northwest corner of Las Vegas Boulevard and St. Rose Parkway • 260-acre parcel located on Las Vegas Blvd. between Starr and Cactus Roads • I-15 frontage • Parcels are adjacent to the M Resort Michael Stuart Senior Vice President +1 702 836 3739 michael.stuart@colliers.com

• Beautifully renovated 12-story building in Downtown L.A. • 80 elegant lofts with desirable common area amenities • Flexibility to sell the units as condominiums or lease them as luxury apartments • World-class dining, entertainment, and employment opportunities within walking distance • $29 billion in new area developments

Kitty Wallace +1 310 622 1900 kitty.wallace@colliers.com www.kittywallaceteam.com

follow the leader

Pro fil e in l e a d ership

Internet Connections Large corporations and small businesses are embracing online sites like Facebook, Twitter and YouTube. Social media expert Aaron Blank shares his tips on using these popular sites as highly effective marketing tools. To tweet or not to tweet, that is the question

for today’s business owners and top executives. The answer, however, is not a simple yes or no. Consider the example of Tony Hsieh, chief executive officer of Zappos.com, an online shoe store selling boots, sneakers, dress shoes and sandals. Since he started using social media and granting access to his employees, his company has seen a dramatic increase in profits each year. In fact, his company is so profitable that Amazon.com bought it for $920 million in 2009. Hseih is one of five hundred Zappos employees who tweet. On the flip side, a hospital CEO—we’ll call her Michelle Doe—is busy dealing with 1,000 doctors and has no time on her schedule to send tweets; instead her marketing and communications department manages the hospital’s social media presence. As a result of her guidance and support—and awareness of her own time limitations—the hospital and its healthcare system are recognized nationally for its social media campaigns and online presence. Who’s tweeting? Every executive must decide whether they want to personally engage with the public or assign that responsibility to a trusted social media team. There is no right answer. Both directions are fine; just be careful about which one you choose. Marc Jacobs CEO Robert Duffy learned this the hard way. After opening a Twitter account for the fashion label, he realized that he didn’t have the time to personally send Twitter messages, so he hired an unnamed intern to update @marcjacobsintl, the company’s Twitter account with more than 114,000 followers. According to Britain’s Daily Mail, one midnight posting from the account read, “You guys and gals have no idea how difficult Robert is. 34

knowledge leader fall 2011

I am only an intern. My last day is tomorrow. I wouldn’t be tweeting this if not!” Another warned: “Good luck! I pray for you all. If you get the job! I’m out of here. See ya! Don’t want to be ya! Roberts a tyrant! Seriously! He is tough!” Would you ask an intern to serve as a company spokesperson in a media interview? Most top executives would say no, and yet, that’s essentially what Duffy did. Starbucks Coffee Company also has a huge social media presence, but its social media accounts are managed by internal marketing teams. It’s doing so well that Starbucks CEO Howard Schultz recently said that social media has “perked up the Starbucks brand.” The company even turned to the public to help reshape its brand and image by launching the website www.MyStarbucksIdea.com, where customers can submit and discuss ideas on what they want to see in their local Starbucks. The results include the creation of a free “Gold” loyalty club card for its frequent coffee drinkers, healthier pastry options, and free music and WiFi. Social media served as instant feedback for Starbucks, helping to make the company profitable again.

Connect with your friends and followers One common social media pitfall that companies encounter is trying to promote themselves or their products without engaging in a conversation. Imagine if you walked into a coffee shop and met someone in line, who ten seconds into the conversation tried to sell you a product. Would you buy it? Not likely But what if, after chatting for about 20 minutes, you learn that she grew up on the same street you did as a child? Later, she mentions a signed framed photo of New York Yankees third

tweeting ceos 1. Tony Hsieh, CEO of Zappos. com. Twitter account is @Zappos with 1.8 million followers. One recent tweet: “Scientific study on how to get kids to eat more vegetables (perceived control): http://t.co/yyhHT7Y” 2. Richard Branson, founder of Virgin Group, which includes Virgin Atlantic Airways. Twitter account is @RichardBranson with 1.1 million followers. One recent tweet: “Any more innovative green business plans out there? Two weeks left to submit yours & win €500,000! http://t. co/dOHGIMO #GreenChallenge” 3. Peter Aceto, President and CEO of ING Direct (Canada). Twitter account is @CEO_INGDIRECT with 5,800 followers. One recent tweet: “Thanx. RT @ davidleger: Thx to Peter Aceto (@CEO_INGDIRECT) & team 4 a great time at family day. Put on a GR8 event & take care of their ppl!” 4. Brian J Dunn, CEO of Best Buy. Twitter account is @BBYCEO with 10,284 followers. One recent tweet: “@Brylski Thanks for letting me know and thank you for shopping with us!” 5. Martha Stewart, media mogul. Twitter account is @ marthastewart with 2.3 million followers. One recent tweet: “The surprising backstory to @google's name & iconic look in this sneak peek of my July 18 Hallmark Channel special: http://ow.ly/5EXV6.”

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Top Social Media Tools Twitter is a micro-blogging service through which you send 140-character text messages to people in your network. The tool allows you to find real-time conversations on subjects that interest you and communicate with people around the world—asking questions and receiving feedback. Some tools to enhance your Twitter experience include: www.TweetDeck.com www.Seesmic.com www.Twidroyd.com www.Bitly.com www.Twitpic.com www.Search.Twitter.com

LinkedIn is a business connection social media tool. Originally used primarily by job seekers and recruiters, today it is becoming more of a business networking site, similar to Facebook.

Facebook is one of the most popular social media networks in the world. Personal pages allow you to connect with friends and family. Business and group pages serve as a blogging tool that connects you with people who want to know about your products or services. If your business has a Facebook page, you can click on “View Insights” on the info page, which will help you to measure your return on investment.

YouTube is a video sharing site that is the second most popular search engine in the world. Businesses and individuals looking to expand their online brands can develop compelling videos which will drive traffic to their websites or social media sites.

connect with colliers Twitter: @ColliersIntl Facebook: www.facebook. com/pages/ColliersInternational/145688428821725 LinkedIn: www.linkedin.com/ company/colliers-international

Dylan Taylor, CEO, USA Twitter: @ColliersUSCEO Blog: www.colliersusceo. blogspot.com

Knowledge Leader Magazine

Twitter: @KnowledgeLeader

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Google+ is a newly launched social media platform by Google. Its goal is to place Picasa (photo sharing), Gmail (mail) and Google Maps—as well as Google’s other products and offerings—onto one platform.

baseman Alex Rodriguez, which she is selling as a fundraiser for her church. You’re more likely to support her and her cause because of your connection and relationship. Like your coffee-shop friend, your online persona should share and engage people in a conversation, first and foremost by building a community. Promote on occasion, but be indirect about it. Get to know your friends or followers first. Social media is meant to be just that: social. When engaging online, listen, learn, engage— and then talk. Create a brand online. Develop a presence and network. Be interested in what others have to say and you will be successful. Before you engage with anyone online, follow these five steps: 1. Identify your goal. Why do you want to go online and engage with anyone at anytime? Having a goal will help guide you. There are thousands of different social media tools to use. The question you should ask yourself before diving in is, Will this help me reach my goal?

2. Listen. Hear what people are saying online. 3. Learn from the professionals. Follow people who you find interesting and who use social media well. See how they use it has a marketing tool. 4. Engage with people. Build and foster an online community. Start a dialogue with someone on a topic you find interesting and relevant. Grow your network of online friends. 5. Talk. You will gain authority to speak once you follow the steps above. By the time you get to this step, you should have a burgeoning network of people and are meeting your goal. If you want to promote something, do so, but subtly. K L Aaron Blank is senior vice president at The Fearey Group (www.feareygroup.com) in Seattle, a public relations, public affairs and social media agency. A sought-after social media coach for top executives, he can be found on Twitter at @SeattleBlank and online at www.aaronblank.com. Colliers international fall 2011

personal biz

Enhancin g the executiv e lifestyle

plane. If possible, begin resetting your body clock a few days before departure by shifting your bedtime to your destination’s time zone. If your trip is short, try to schedule your meetings for times close to when you’d be awake anyway. It may not be worth resetting your internal clock if you’re flying home again in a day or two. Upon arrival, go for a walk. Exposing yourself to daylight and external stimuli will help your body chemistry adapt. If you must take a nap, keep it short. Get on a normal schedule for your destination as quickly as possible.

Staying Healthy

necessity for many professionals. Here are some tips for making your next business trip overseas a huge success—even before you walk into your first meeting.

Before leaving home, check your health insurance to determine whether or not you’re covered overseas. If not, consider purchasing travel insurance, particularly if you will be visiting remote locations or making numerous or extended trips. In the U.S., consult the Centers for Disease Control (CDC) website (www.cdc.gov/travel) for information about recommended vaccinations and other health issues for your destination. In Canada, visit the Public Health Agency of Canada (PHAC) website (www.publichealth. gc.ca). If immunizations or special prescriptions are needed, visit a travel medicine clinic. Some vaccinations require repeated administrations over time to be fully effective, so plan ahead. Both the CDC and the PHAC websites have general and country-specific information on staying healthy while traveling, including information on food and water safety. Pepto-Bismol (bismuth subsalicylate) in liquid or chewable form can help deflect stomach problems. If you do become ill, drink plenty of liquids to avoid dehydration. Drugs such as IMODIUM (loperamide hydrochloride) can suppress symptoms and help you get through meetings, but if your illness is bacteria-related you may also need antibiotics. Your hotel should be able to arrange doctor’s visits if necessary.

Reducing Jet Lag

Passport and Security Issues

Staying healthy and getting as much rest as possible en route are keys to minimizing jet lag. Bring a travel pillow for comfort, as well as earplugs and a sleeping mask to block out distractions. Even if you can’t sleep, just closing your eyes and listening to relaxing music can help. Get up and move about regularly during the flight. It can be tempting to knock yourself out with sleeping pills, but staying inert for extended periods can increase the risk of blood clots. If you do take a sleeping aid, stick to short-duration pills or halve the recommended dosage if your flight is shorter that a full night’s rest. Eat lightly before, during and after your flight. Dehydration exacerbates jet lag, so drink plenty of water, and avoid alcoholic beverages. Change your watch and start mentally transitioning to the new time zone as soon as you board the

Before departing, ensure your passport is valid for at least six months from your travel dates—which is required by many countries for entry—and that you have all necessary visas. Consult your destination’s embassy or consulate for current requirements. Make photocopies of your passport and relevant visa pages. Leave one at home and keep the rest separate from your passport. If your passport is lost or stolen, contact your

Business Class traveling abroad for business? Read this first. by Annika Hipple

In today’s increasingly globalized world, traveling internationally for business is becoming a

knowledge leader Fall 2011

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personal biz

Enhancin g the executiv e lifestyle

country’s nearest embassy or consulate as soon as possible. Information on consular services is available on the U.S. State Department’s travel website (www.travel.state.gov), which also maintains up-to-date information about conditions in most countries. Canadian citizens should visit the Foreign Affairs and International Trade website (www.voyage.gc.ca). Both websites are good sources of information if you’re traveling to an area that is politically volatile or has recently experienced a natural disaster. The State Department encourages U.S. citizens to register for the Smart Traveler Enrollment Program (www.travelregistration.state.gov), which helps the government provide information and assistance in emergency situations.

Money Matters Once upon a time, travelers’ checks were the way to go on any foreign trip, but they’re no longer as easy to exchange in many countries. Cash machines such as ATMs are now the most common way of obtaining foreign currency. Call your bank to find out the fees associated with withdrawing money overseas; typically you will be charged a small transaction fee by the ATM’s bank, your own bank, or both. You may also be charged a conversion fee, which is generally around three percent. If your ATM card is also a debit card and has a Visa or MasterCard logo, you can also use it to charge purchases directly. In such cases, you’ll pay a conversion fee but typically no transaction fee. Credit cards are also a good bet in many countries. Most major credit cards charge a 3 percent foreign exchange fee, but the exchange rate you receive will usually be quite favorable. Before leaving home, call your credit card company or bank to let them know when and where you will be traveling. This lessens the likelihood that your debit or credit card will be frozen due to suspicious activity that doesn’t match your usual spending patterns. Jot down your card numbers and customer service phone numbers—which are listed on the back of the cards—and keep them in a safe place. If your cards are lost or stolen, notify the issuer as quickly as possible. It’s always a good idea to carry a decent amount of U.S. cash in case you encounter problems using your cards overseas. In lessdeveloped countries credit and debit cards are not widely accepted outside of major hotels and high-end shops and restaurants; even in 38

knowledge leader Fall 2011

destinations where their use is common, there may be a minimum purchase price for using a card. In many countries you can use dollars as well as the local currency for travel services and tips, so it’s worth bringing some smaller bills. Avoid bringing bills that are heavily worn, torn, or otherwise damaged, as these will be rejected in many countries, particularly in Asia, Africa, and Latin America.

Driving Overseas If you plan to drive overseas, consult your destination’s embassy, consulate, or national tourist office for current rules. Many countries require or recommend that foreign drivers carry an International Driving Permit (IDP), an officially recognized multilingual translation of your driver’s license information. The IDP is valid only in conjunction with your regular license and must be issued in the same country as your license is. If you are renting a car, check with the rental agency for any additional rules. Rental agencies and insurance companies sometimes require the IDP even if it is not mandated on a national level. In the North America IDPs cost $15 (U.S. or Canadian) and are available through the American Automobile Association (www.aaa.com), the National Automobile Club (www.thenac. com), and the Canadian Automobile Association (www.caa.ca). Permits are valid for one year and may be issued no more than six months before the desired effective date. Before getting behind the wheel, also be sure to familiarize yourself with international road signs, speed limits and other regulations.

Cultural Etiquette It’s easy to cause accidental offense if you’re unfamiliar with your host country’s culture and etiquette. How should you greet and address foreign colleagues? Should you bring gifts? What should you do when invited to someone’s home? What unspoken conversational and behavioral rules should you follow? All of these things and more affect how you are perceived, which may be critical for the success of your business meetings. Fortunately, resources are available to help you navigate the minefields of international etiquette. Check your bookstore travel section for relevant books for your destination. General books on international etiquette include Essential Do’s and Taboos: The Complete Guide to International Business and Leisure Travel by Roger E. Axtell.

Business Travel Resources These handy, online resources will help prepare you for your business trip overseas: Seatguru.com: Detailed information about seat configuration and services on most major airline flights. XE.com: Currency website with userfriendly currency conversion tool. FlightBoard: Mobile app that provides current flight arrival and departure information for airports all over the world. All Subway HD: App providing maps of 128 subway systems around the world. Google Maps: Popular online mapping service, now also a free mobile app (m.google.com/maps). Google Translate: Website and app providing translations between more than 50 languages. Free Wi-Fi Finder: Online search tool and free mobile app that identifies free and paid wireless Internet hotspots around the world (www.jiwire.com).

Useful online resources also exist, including Executive Planet (www.executiveplanet.com) and the British website Travel Etiquette (www. traveletiquette.co.uk). Both have detailed country-specific information on how to behave in a variety of situations overseas. K L Raised bilingual and bicultural, Annika S. Hipple calls both the U.S. and Sweden home. She took her first international trip at the age of five months and has been a frequent traveler ever since. From Egypt to New Zealand, Mongolia to Chile, she logs tens of thousands of miles annually as a freelance travel writer and tour leader. knowledge-leader.com

In Focus

Fro m t h e Presid en t & CEO

Network Solutions Technology in general and social media in particular enables us to share, collaborate and succeed together. by doug frye

knowledge leader fall 2011

laboration and radically accelerated the field, transforming alchemy into chemistry. Likewise, the Web accelerates the ability of people to share, collaborate and advance. So, bring that idea into an organization. Our Chief Information Officer Veresh Sita, often says, “if only Colliers knew what Colliers knows,” making the point that we must constantly fight silos, to connect more people to more information in a way that encourages collaboration. We have launched several new search tools to give our people broad access to data about colleagues, clients and properties, all with the aim of enhancing a culture of collaboration. I like the “Ask Me About” feature that encourages everyone to be an expert: not only can I can find out about office leasing in Brisbane and retail accounting in Bulgaria, I can also find Colliers experts willing to share their knowledge of bass guitar, triathlons or how to make the perfect pie crust. Another key point of learning from the Invisible College is the rather embarrassing similarity between knowledge-hoarders of the seventeenth century and contact-hoarders in our industry today. Too frequently, professionals jealously guard their client lists for fear that someone (maybe from their own office) will “steal” that client. At Colliers, we see it differently. Relationships can’t be stolen—but they will break down without proper care. The Invisible College developed a system for sharing and collaboration, and we’ve done the same thing with a system called Client Engagement. We bring our professionals together in teams (based on geography, service type or industry) in sessions held worldwide, and help them share their best knowledge and relationships. In short, we make sharing a habit. Ultimately, this benefits clients by creating a truly collaborative, integrated solution, where

Doug Frye is the global president and chief executive officer for Colliers International.

we address their complete cycle of needs. We estimate that owners must work with as many as 40 different vendors to service a single investment property, so it’s a breath of fresh air to bring these service providers together and know that they’re also talking to each other behind the scenes, ensuring everything is working together in concert. You’d also be surprised how often new business opportunities emerge simply because we tap into Colliers’ own cognitive surplus. In the United States, we noted $5 million in revenue that happened because of this collaborative system—business that otherwise never would have happened at all. A final way we can tap into the cognitive surplus is through social media—many professionals in professional service fields spend considerable time blogging, tweeting and giving their expertise for free. To be sure, this information requires a good filter, but I think of social media as a new way for us to listen. We can get closer to our clients and the property industry not simply by marketing ourselves on social platforms, but by using social media as a tool to learn more about the marketplace. For all of us, there are only 24 hours in a day. I love the way new technologies are enabling us to spend more of them connecting and supporting our clients, our colleagues and our communities. K L knowledge-leader.com

Kenna Klosterman

I am always fascinated to learn what our people are up to away from work—whether it’s bicycling hundreds of miles for charity, leading a community center, getting immigrant children ready with back-to-school supplies or facilitating an online support group for new parents. They do this stuff for free. In an industry where time is money, that is especially significant. When people choose to spend their free time contributing high-value talent and expertise to causes they care about, whole industries are shaken up, because the traditional rules of economics no longer apply. I love it when that happens. What I’ve noticed among our people is the subject of Clay Shirky’s recent book, Cognitive Surplus. He suggests that people are spending less time on passive entertainment, such as TV, and more time online connecting, collaborating, and devoting their time and talents to the causes they care about. Technology, and particularly social platforms, transform what used to be free time spent as couch potatoes into voluntary, productive, creative time—what Shirky calls cognitive surplus. He points to Wikipedia, PickupPal and the Apache project as examples of how people with similar passions are willing to devote their expertise to a cause, free of charge. By some estimates, adults average 20 hours of TV time per week, globally. Shifting just part of that time could have a major impact. I love following Shirky, a New York University professor, as he looks beyond today’s achievements to highlight how London-based scientists and thinkers formed the “Invisible College” in 1645 based on shared knowledge and experimentation. Up to that time, science was typically a closed practice, with each alchemist hoarding his or her own knowledge. The Invisible College brought a culture of col-