Boeing Realty’s Flight Plan for Excess Assets
(Editor’s Note: Boeing Realty Corporation, a wholly-owned subsidiary of the Boeing Company, has been assigned the task of developing and selling its considerable real estate assets. Current projects include 1,000 acres of land in various stages of development with a market value of $1.5 billion when fully built-out. With a lean in-house staff, this strategy can only be successfully implemented with the help of third-party providers. Here, Phil Cyburt, president, Boeing Realty Corporation, discusses how the company works with the commercial real estate industry, what it expects from its regional service providers and how it manages those relationships.) |
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Question: Could you describe Boeing Realty Corporation?
Cyburt: Boeing Realty Corp. has two distinct parts. First, we handle corporate real estate for Boeing worldwide—buying, selling and leasing real estate. Second, we have a development portfolio of assets or surplus properties that need some form of a value-add component. The two parts of the company are separate and distinct. The company to date has developed more than seven million square feet of commercial space, brought more than 1,000 acres of mixed-use development to the market in the last five years and completed 50 major development projects throughout the U.S. Its projects are diverse, ranging from office buildings to senior housing developments to even a golf course.
Currently, the portfolio has over 1,000 acres of infill sites, concentrated mostly in the Southern California area and the Puget Sound region. We are one of the largest
private owners of real estate in California, Washington State and Missouri. We are not, however, investors in real estate but rather substantial owners of real estate. Boeing
Realty is structured to transition these assets.
Question: How does Boeing Realty differ from other corporate real estate entities?
Cyburt: Corporations tend to dispose of assets as soon as they can. Due to the size of our assets, it is difficult to find a buyer for a project like our Pacific Gateway project in Kent, Washington. It is a development of surplus land owned by Boeing. The 240-acre business park is located next to the Boeing Space Center.
In all, there are 431 acres and a campus of 2.5 million square feet. It is very tough to have just one buyer go in and perform all the development work necessary with
out Boeing sustaining a heavy discount in the pricing from a bulk sale. Our real estate portfolio is like a ranch of which there are many in Southern California. We
have a lot of land that needs entitlement work and needs infrastructure. Our developments must also be balanced with the ongoing needs of Boeing Company and
the communities in which we do business.
Question: Could you describe how you work with the real estate industry on these projects?
Cyburt: We work on a project-by-project basis and leverage talent from outside our company for each project. We put together the best team that fits that project. On the corporate side, though, we brought in Trammell Crow to help us on transaction management. Same thing in the Southwest, Midwest and East, we brought in CB Richard Ellis to manage the transaction. A lot of due diligence and tactical elements go on in real estate that need to be managed by real estate people. Within Boeing Realty, we focus on strategy and on our customers.
Too Bad We Don't Know Their Names
According to a survey conducted with corporate real estate executives at large corporations in the U.S. and abroad in August 2001 by the International Development Research Council, now merged with NACORE to form CoreNet:
- Nearly half — 48 percent — of companies are returning more space to the market than they’re acquiring in new leases or acquisitions, but 23 percent said they’re taking more space off the market than they’re vacating.
- Nearly two-thirds — 63 percent — are holding off on plans to acquire additional space. (It’s the 32 percent who said they are not holding off that we want to meet!)
- Three-quarters — 76 percent — report new cost controls as a result of weaker economic conditions.
- 62 percent reported that their companies had experienced layoffs as part of an ongoing cost control program.
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Question: Could you describe one of your major projects and what you are doing with it?
Cyburt: Pacific Center in Long Beach is one of the largest infill redevelopment projects in the Los Angeles Basin right now. We are redeveloping 260 acres. We will demolish all six million square feet of existing space and we will replace it with over $1 billion worth of real estate. Plans for the site call for five million square feet of office space, 150,000 square feet of retail and 2,500 residential units. We will move the project through the development process—political, entitlements, infrastructure,
environmental remediation—to the point where developers, users and capital sources can understand the project and actually get permits to build buildings in a relatively short period of time. That is the strategy on the development side.
Question: How do you work with outside service providers on this project?
Cyburt: We have 31 people on staff; it is very thin. At Pacific Center, however, we have 40 different consultants working on the project. Our project managers have project-specific duties but they will have project-related people on contract hire. This is similar to the way development companies operate. We hire people to take care of each layer of the development process. We could easily build this company into 200-300 people but in-sourcing would do a disservice to the Boeing Company.
Each project needs to stand on its own.
For more information:
Boeing Realty Corp.
PacifiCenter
Will Swap Buildings for Jobs
Come Hither: Catching the Eye of Relocating Corporations
For a community to be competitive in economic development, either causing existing companies to expand or recruiting new companies to the area, the following
are the most important elements:
- Existing buildings.
- Approved (zoning) and improved (horizontal infrastructure) industrial property for either office or manufacturing use.
- Tax structure that recognizes the importance of contributory businesses and does not disproportionately place the burden of revenue generation on the productive sector.
- A history of cooperative attitude within the community, which fosters cost maintenance or cost reduction for the company.
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Here’s a new wrinkle in the economic development arena: The Big Business Center concept for two facilities at Sawyer International Airport & Business Center in Marquette, Michigan, would swap the buildings for creation of 400 jobs in each of them. Marquette County’s decision came on the heels of an announcement by the area’s largest employer, Cleveland Cliffs Mining Company, to lay off more than 900 employees for an indefinite period of time. The decision to trade the buildings
for jobs was driven primarily by the cost to maintain the vacant facilities and the costs of alternative actions.
“Generally speaking, a company can occupy either of the facilities, create 400 jobs and retain those jobs for a period of five years and at the end of that time, the County will hand over the deed to the property,” said Vikki Kulju, development and marketing manager.
One facility is a 128,918-square-foot, three-story office building. It has four back-up generators, 700-ton HVAC, primary and secondary air handling units, fiber optic capabilities and was built to withstand a nuclear attack.
The second facility sits on 21 acres, adjacent to an 18-hole golf course. The 119,000-square-foot facility is a single-story building in a campus-like setting. It was previously used as a hospital.
Sawyer was formerly known as K.I. Sawyer Air Force Base. Closed as part of the cutback in defense spending, it has been making a successful transition to a
private sector development for the past six years.
Since the building-swap plan was announced, the County office has attracted considerable interest from companies as distant as Washington, DC, and Texas.
“It’s almost a little overwhelming, like the saying, ‘Be careful what you wish for,’” said Kulju. “But the announcement did exactly what we’d hoped it would do. Now we have to do a lot of follow-up to evaluate opportunities.”
“The Flow of Money and Its Impact on Local Economies,” by William H. Fruth, published by NAIOP.
Ellen Rand and Ron Derven, co-editors, Development magazine.
Understanding Corporate Real Estate:
By Ellen Rand, co-editor of Development Magazine
