In September of 2006, after 16 years of providing real estate advice to Black and Veatch's ("B&V") branch offices, the leading global engineering, consulting and construction company asked Studley to evaluate all possible solutions for upgrading its international headquarters. Given B&V's green commitment to its clients, it was now looking to be in a LEED-certified building that also represented the company's mission of improving and sustaining the quality of life around the world. The organization was open to new construction but sensitive to cost and disruption to its operation. B&V's built its international headquarters in Overland Park, KS in 1976, and then by utilizing a combined deal structure including a synthetic lease and sale-leaseback, it doubled its size in 1997 and has been the sole tenant ever since. Ten years later, the building is still functionally sound, but its infrastructure and design are outdated.
Consideration and Analysis
B&V set forth several conditions for the project team to meet including; cost controls, future expansion possibilities, and environmental sustainability objectives. Already occupying the largest office building in Kansas, B&V had limited options; the firm could maintain its current location and renovate or relocate to new development with a build-to-suit. Studley surveyed the entire Kansas City metro area for both available buildings and development sites considering more than 40 locations, while simultaneously beginning discussions with economic development officials in Kansas and Missouri. Knowing the economic value of retaining a B&V, local and state governments were eager to provide generous economic incentives. With these incentives only available to new construction or a building purchase, continuing to lease was out of the question. The team developed a progressive analysis to lead B&V's senior management through specific criteria utilized for evaluating potential sites, as well as financial and development options. Complex financial modeling was created to address the business operating cost inclusive of governmental incentives and capital market instability. The team completed all analyses prior to engaging the existing building's owner.
Result
After careful consideration of all options, Studley recommended that B&V purchase its existing 600,000-square-foot world headquarters building at 11401 Lamar Ave and renovate. The construction costs of a new building did not fall within the cost controls or a limited operational disruption set forth by B&V. The purchase allowed the company to access economic incentives, meet its environmental initiatives and upgrades, gain control over construction, development and expansion of the building itself and limit the disruptions to daily operations.
The project team was able to save B&V more than $37 million dollars compared to the building owner's initial proposed pricing on the purchase of the building. In addition, Studley negotiated a combined state and local incentive package in excess of $40 million, including $25 million of outright grants which were utilized to pay for 40% of the building purchase - a critical component of the transaction given the highly unstable capital markets. Overall savings will be utilized for enhancements to the existing facility, including extensive workspace, common area and facility infrastructure upgrades; improved HVAC and energy management systems; external landscaping and improvements in controlling storm water run-off and providing rainwater reuse systems. In addition, a solar courtyard, solar canopy, bio garden and an innovation pavilion are planned for the world headquarters.
