By Joe Delogu, Founding Principal at FD Stonewater

Recently, I had the privilege of joining Frank Smith, Deputy Executive Director for the Georgia State Properties Commission and Bruce Nelson, Executive Director of Real Estate Strategy, State of Tennessee Real Estate Asset Management on a webinar panel for the National Association of State Facilities Administrators (NASFA) titled The Looming Crisis in Commercial Real Estate (a description is available HERE).

The webinar was moderated by FD Stonewater partner Norman Dong, and during the panel we examined the considerable challenges facing the commercial office market, including increased vacancy rates, skyrocketing construction costs, rising interest rates, and declining asset values. We explored how recent dynamics have led to a “perfect storm” in the office market that is negatively impacting macroeconomic lending activity through significant credit tightening, decreasing loan origination volume, and challenging economic conditions for owners and investors alike.

Additionally, Frank, Bruce, and I presented detailed case studies from recent projects that have been adversely impacted by these difficult market conditions, and we discussed challenges and potential opportunities for Government real estate officials during these difficult times.

Following a thought-provoking discussion, the webinar concluded with our shared concerns about the current economic environment making it more difficult for landlords to meet their lease obligations and finance tenant improvements, while at the same time presenting significant obstacles for the local property management teams and special servicers who often lack the experience and market expertise required to resurrect a failed project.

That said, we do see a silver lining in the rare increased availability in many markets that could provide valuable opportunities for Government real estate officials to renegotiate existing leases or upgrade to higher quality buildings and preferred locations through new leases or acquisitions.

Click here to view the webinar in its entirety.

By Jeff Toporek and Owen Burke 

FD Stonewater has been actively engaged in the Property Technology (“proptech”) space since its founding and our company views our relationship to and intersection with technology as critical to our business. We firmly believe that technology strengthens our company, so we continually invest resources to implement the best tools possible. This has made us better and more efficient while enhancing our decision making – key differentiators in the real estate investment arena. Here, we share how we have approached the adoption of new technology and why it is more important than ever to have a strategy in place.

Click here to view the PDF version.

Our Perspective

As an industry, commercial real estate (“CRE”) has traditionally been slow to adopt new technologies We deal with large amounts of information and perform heavy analysis, largely with tools that are decades old. Information is fragmented and the needs of companies are nuanced and complex. Unfortunately, the “holy grail” for an integrated technology solution for most CRE companies just does not exist, yet; we have been on this quest for a long time. This leaves most companies no choice but to stack together products that are narrowly tailored for specific problems – such as acquisitions pipeline, leasing, market info, investment management, and more – or build costly custom solutions. While the adoption of new technology presents challenges, there is true value in these solutions. The ability to accurately and efficiently organize and analyze information is better than ever before, and advancements in Artificial Intelligence (“AI”) are poised to dramatically accelerate the effectiveness of new technologies in the near future.

This is an exciting time for technology solutions, and the coming wave of AI applications will propel a revolution in every industry, including CRE. AI will have an enormous impact, from completing rote tasks to assisting more complex and nuanced functions. As an early example, three years ago we invested in a product called Prophia for automated lease abstracting. It features an amazing interface with high-quality visual graphics – such as stacking plans – and has robust data collection capabilities, providing real leverage across our acquisitions, asset management, and legal teams. Each year since implementation, the percentage of each document that can be abstracted via machine learning has increased drastically. While humans still need to review, verify, and complete the information today, we are on a path to where human functions will soon be minimal.

As AI accelerates and its applications grow, higher levels of our business will be impacted. We expect that AI will make information more accessible while simultaneously enabling more advanced analysis, including deeper insights into investments and operations. Companies that adopt new technology will increase focus on critical thinking and problem solving to gain an edge in real estate investing and management. We believe it is critical to have a defined strategy to stay at the forefront of technology utilization.

We are often asked about our approach to proptech and how we navigate the changing tech landscape. Here, we offer our thoughts on our proptech strategy, possible pitfalls, and how we utilize our specific tech ecosystem. To be sure, technology utilization is not a “one size fits all” practice. We hope this series gives you a sense of our general approach to tech deployment and insights on how to leverage tech to fit your corporate culture and solve your unique business challenges.

Part 1 | Our Strategy 

After 30 years of experience in the proptech space, we have learned a tremendous amount about how to evaluate and implement new technology. Technology – when implemented correctly – should reduce friction, enable efficiencies, and enhance employee satisfaction. We have developed an approach to navigating the landscape to identify and prioritize solutions, select best-in-class technology companies, and implement the products successfully. Our focus is on readily available products at value-driven pricing for our organization (mid-size with 45+ people).

• Start with a Pain Point
  • Adopting technology, no matter the application, should solve a specific problem. This is a top priority for us, and we strive to quantify, measure, and reassess our technology solutions whenever possible. Measuring will help prioritize and support the business case for the product. Adoption is much more likely to succeed if it solves a current problem for the team.
• Identify Solutions
  • Peers: Go beyond web searches. Have conversations with trusted peers to see if they are experiencing similar challenges or have a recommendation. Though you may compete with them, sharing this type of information and advancing technology solutions makes everyone better and supports collective success. We’ve found that if we share problem-solving information with peers, we often receive great insights from them in return. This level of collaboration also helps our vendors succeed by providing them with new customers.
  • Industry Participation: We regularly attend conferences to explore new technologies, talk to users, and learn more about the products. This is typically followed by multiple demos with the product team where we ask as many questions as possible and explain the challenges we are facing.
  • Proptech Investing: Several years ago, we decided that we wanted to participate in the success of the proptech companies we were utilizing. We met with several companies and ultimately decided to invest with Camber Creek, a strategic venture capital firm focused on investing in real estate technology companies. This has proven to be an invaluable relationship that is mutually beneficial in many ways. We “test drive” and provide feedback on both perspective and new portfolio product offerings, and in return they suggest new solutions that we might find useful and opine on opportunities to potentially invest in new technologies.
• Partner Selection
  • Solve for the Core Need: Always focus on the best solution to solve the problem you have identified. While extra benefits can add value, it is important to remember that the product should address the core need first and foremost.
  • Request a Trial Period: You often won’t know the product’s full capabilities until you use it for an extended period of time. Ask for a demo or trial period to test drive the product and ensure that you invest with limited risk.
  • Ability to Evolve is Key: When considering a new product, we focus on the product roadmap, company leadership, its investors, and the product’s other clients. Proptech is rapidly evolving, so we want our partners to evolve as well. The product roadmap will help to identify areas the technology may address in the future.
• Adoption
  • Once we identify a solution, the next step is adoption. Adoption of new technology can be difficult, and the old saying “change is hard” rings true. Employees will be hesitant to embrace something new, even if it solves a problem. Below are some helpful techniques to increase adoption across your organization:
  • Include key end users in the research and product selection process. The importance of inclusion cannot be underestimated. Thoughtfully consider which individuals and teams at your organization will benefit from the solution and encourage their participation in the process. When you include the intended end users of the technology in the process and seek their participation, they will share a vested interest in its success.
  • Senior-level support is key, and not just for funding approvals. Senior leaders should lead by example, learn the technology, encourage broader adoption, and actively participate in its success.
  • Training, training, and more training! Successful adoption requires a significant level of effort and training at the front end. Ensure the product includes a robust, in-place onboarding process to support as your team through implementation. Weekly calls with the technology provider might be necessary to ensure the team’s questions are answered, and many providers can help track the product’s adoption momentum. Periodic training sessions after initial implementation can also help teams stay on course and fully engage with the new technology.
  • Provide feedback. If the product is providing a meaningful solution, let the vendor know. Give them honest feedback about possible improvements or recommendations for making the product better. View the vendors as partners; a positive relationship will make both parties better and should lead to mutual success.

Part 2 | Pitfalls and Why Tech Development Fails 

• Tech first, not real estate: We have made the mistake of investing in real estate companies that have tech ideas. For us, the most successful products have come from true tech companies with products that solve real world, real estate industry inefficiencies.
• Partnership vs. Product-ship: Does the company want to just sell you their product or do they want to build a partnership? One of our most successful tech partnerships has been with Juniper Square, a company founded by tech experts that identified challenges in real estate investor reporting. FD Stonewater started using the Juniper Square investor portal when it was a relatively new platform. As Juniper Square’s footprint and capabilities have grown, the Juniper Square team has listened to client feedback and broadened their product offerings to address client problems. This has led to us expand our relationship with Juniper Square and we continue to beta test products in their development pipeline. This relationship is built on mutual trust and continues to benefit both parties.
• Companies falling short on roadmap promises: Product roadmaps are extremely important. Very often products only solve a portion of your problem at the outset. You need to have confidence that they will deliver the entire solution within a reasonable amount of time and stay in tune with progress. Reassess when necessary.
• Great demos but difficult to onboard: The product demo can look great, but what’s really under the hood? Try to demo the product when you can play with it in real time, test the capabilities and functionality, and see if it will provide the solution you are seeking. It’s important to have a termination option if the product fails, adoption rates are poor, or customer service does not deliver.
• Cut bait on tech that isn’t working: If a product isn’t working, or if it is creating more pain points rather than solving the problem, let it go. It is okay to admit failure – this is part of making progress. Take time to get feedback from the users in your organization, reflect on why the tech might have failed, and move on. If you haven’t failed in tech implementation, then you probably aren’t doing enough of it.

Part 3 | Our Tech Ecosystem 

Through selective exploration and adoption of new technology we have created a bespoke tech ecosystem to specifically address our company’s unique set of challenges. While it is ideal for new technologies to seamlessly integrate with other products, a “one stop shop” simply does not exist yet in the proptech arena. Our tech ecosystem incorporates specific solutions for areas including analytics, construction management, lease management, energy efficiency, valuation, investor management and fund administration, and accounting. We also have a suite of non-real estate focused tech products that we utilize daily across the company. These general tools can be powerful and easy to use, benefiting from larger markets and more development. When there isn’t a purpose-built product available (or one that justifies the cost), we’ve had success tailoring the technology to meet our needs.

This diverse set of technologies and software enables more efficiency and better productivity across the board while we continue to explore and adopt technology to solve our specific challenges. As the proptech arena expands and develops, there is more overlap between products and competition. Competition is a great thing for any consumer, and we have experienced many “close calls” on selecting competing or similar tech solutions. It is important to maintain good relationships with companies you don’t select, as there could be another opportunity to work together down the road.

We are excited to see what the future holds for real estate technology and are continuously seeking quality tech products that can add value to our business. We have recently considered various tech solutions in areas such as loan management and treasury management (and have even seen advances here and there) but none of the solutions have quite hit the target in terms of cost versus capability. We have also seen components of broader tech products that solve a problem, but the components are typically part of a larger (and more costly) product that we don’t need.

In the near future, we hope to see advances in the following areas:

• Treasury Management: A system that provides real-time data for all our bank accounts and transactions without cumbersome authentications and breaks in those authentications. Understanding restricted accounts and deposit interest yields is also key.
• Asset and Portfolio Management: Dynamic source of data from the property through the investor level with advanced analytics, built-in logic, custom reporting, and automated report generation.
• Loan Management: Loan abstracting with live connections to source docs, covenant monitoring, reporting, and notifications when markets move so that we can complete beneficial transactions or prevent potential issues.
• Drafting Process: A product focused on Letter of Intent (LOI) tracking and conversion of LOI data into a draft lease or Purchase and Sale Agreement (PSA) format.

Invest with FD Stonewater

The STAR Evergreen Fund invests in mission-critical single-tenant real estate assets in U.S. secondary and tertiary markets to generate stable current yield and unlock long-term value.

Learn more about the fund: https://fdstonewater.com/star-fund/

This week Jeff Toporek, Co-Founder and Principal of Investment at FD Stonewater, was featured on two episodes of The Real Estate Syndication Show, hosted by Whitney Sewell.

Watch the Podcast 

Episode 1 | Completing $8 Billion Acquisitions – In the first of two episodes, Jeff and Whitney discuss  Jeff’s background, FD Stonewater’s evolution over the past 20 years, and how the firm has accomplished $8 billion+ in acquisitions and advisory services.

• Creative Problem Solving (15:46-17:11)
• Market Analysis / Anticipating Future Issues (19:20-22:00) 

Episode 2 | Behind the Scenes of Real Estate Operations – In the second installment of the podcast, Jeff and Whitney discuss our approach to proptech, how to leverage tech for real estate investing, and how our tech ecosystem supports the firm’s new STAR Evergreen Fund.

• STAR Evergreen Fund (7:18-9:18)
• FD Stonewater’s Technology Approach (9:35-13:00) 
• FD Stonewater’s Charitable Trust (29:18-30:11)

Invest with FD Stonewater

The STAR Evergreen Fund invests in mission-critical single-tenant real estate assets in U.S. secondary and tertiary markets to generate stable current yield and unlock long-term value.

Learn more about the fund: https://fdstonewater.com/star-fund/

Disclaimer

This is not an offer to sell or a solicitation of an offer to purchase any securities, and any such offers will only be made pursuant to a private placement memorandum or similar disclosure document and other definitive documentation relating to any such security. The statements in this podcast include the speaker’s personal opinions and predictions, which by their nature are uncertain, and there can be no assurance that actual events will occur as predicted.

FD Stonewater announced today that Norman Dong has been promoted to Partner with the firm.

Mr. Dong joined the company in 2017 as Managing Director and plays a leading role within the firm’s third-party advisory and principal development platforms with a primary focus on federal, state and local government real estate transactions. He is a nationally recognized expert in the government real estate arena and frequently participates in industry panels and speaking engagements. In addition to his responsibilities at the company, Mr. Dong serves on the faculty of the Georgetown Urban and Regional Planning program where he teaches a course on government real estate.

Mr. Dong’s career spans over 30 years and encompasses a distinguished history working in both the private sector and as a government executive. A graduate of Yale University and Harvard’s John F. Kennedy School of Government, Mr. Dong has served the Federal Government in executive, management, and advisory capacities; including previously held positions as Deputy Controller of OMB, the CFO of DHS/FEMA and Deputy Mayor for Washington, DC. Prior to joining FD Stonewater, Mr. Dong was the Commissioner for the U.S. General Services Administration (GSA), Public Building Service, where he led the asset management, design, construction, leasing, building management, and disposal of nearly 374 million square feet of government-owned and leased space across all 50 states, six U.S. territories, and the District of Columbia.

FD Stonewater Principal Chad Habeeb said, “Norm has had an enormous impact across our real estate business, particularly within the firm’s government sector third-party advisory and principal development platforms. His notable background, insight, and expertise in government real estate matters enhances our strategic advisory practice and he has brought tremendous value to our public sector-focused real estate practice.”

Principal Joseph Delogu further commented, “Norm’s experience, relationships, and wealth of knowledge are invaluable. With Norm on board, we have expanded our capabilities and positioned ourselves as the largest, most experienced government lease advisory team in the country. We are pleased to promote Norm to Partner as he continues to be integral not just in our leasing and development practices, but also as a thought leader for our company and the industry.”

By Norman Dong, Joe Delogu, and Chad Habeeb 

What Just Happened?

GSA’s recently issued Asset Management Alert, which now requires Federal tenant agencies to sign non-cancellable Occupancy Agreements (OAs), is an unfortunate step in the wrong direction. Although the objective to mitigate the financial liability of vacant leased space makes sense, the Agency’s course of action does not. This recent GSA policy change will increase leasing costs, decrease real estate values for Government-leased properties, and compromise the Agency’s overall value proposition in managing the Federal real estate portfolio.

The GSA OA reflects the business terms governing the relationship between GSA and the tenant agency for a specific space assignment. It includes a description of the space and services, the financial terms, and the length of the tenancy. GSA has traditionally utilized a “cancellable” version of its OA, which allows tenant agencies to return unneeded space back to GSA with 120-days’ notice. In contrast, GSA has reserved the use of “non-cancellable” OAs for more specialized Agency requirements where there is little chance that another agency or tenant would be able to use the space.

The cancellable OA has long been a central element of the Agency’s value proposition. It allows GSA to provide a form of “insurance” by serving as a clearinghouse for unneeded space and mitigating the risk of any change in an agency’s space requirements across the broader portfolio of Federally owned and leased assets. For decades, the cancellable OA has provided tenant agencies with the assurance to make thoughtful and deliberate decisions about their long-term space requirements knowing that should things change over time, GSA would have their back and allow them to return excess space that other Federal tenants might use.

The Unintended Impact of the GSA Policy Change 

The GSA Asset Management Alert issued in April 2023 suspends the concept of the cancellable OA and eliminates the ability for tenant agencies to return leased space back to the GSA portfolio. GSA issued this Alert in response to decreasing demand for general office space in a post-pandemic environment and its mounting financial liability as agencies exercise their right to return space. Clearly, GSA needed to take some action.

But the Agency is taking the wrong approach. The interim guidance, which sunsets at the end of FY2024, narrowly focuses on the potential problem of Agency space givebacks but disregards GSA’s larger role in managing the Federal real property portfolio. This draconian policy change will create a multitude of problems in the short term that will far outweigh any future benefits that the Government may realize over the longer term.

As GSA shifts to non-cancellable OAs for all new leases, agencies will now opt for the shortest least term possible as they must now shoulder the economic burden of excess real property. Over the past decade, the Federal Government has embraced longer lease terms that maximize competition and allow landlords to secure lower financing costs, in turn, passing these savings onto tenant agencies in the form of lower leasing costs. As the Government reverts to shorter lease terms, these benefits will be lost.

The reduction in firm terms resulting from the recent GSA policy change will produce an immediate set of economic problems for the Government: 

• Increase in Financing Costs: Shorter lease terms will lead to an increase in financing costs for building owners. The Government’s reversion to shorter lease terms will create additional uncertainty and risk for building ownership because the cost of financing becomes much more expensive or potentially unavailable altogether. These increased costs will ultimately be passed on to tenant agencies as higher rent.
• Reduced Competition: With shorter lease-term commitments, we should expect to see a sharp reduction in competition for Federal leases. For new or replacement leases with a relatively short firm-term (e.g., five years instead of ten years), the Government is artificially constraining the amount of time for potential bidders to recoup their costs, effectively handing the incumbent lessor a significant home court advantage – decreased competition further results in higher costs to tenant agencies.
• Hyper-Amortization Impact: As the Government reverts to shorter lease terms, tenant improvement costs to prepare the space must now be capitalized over a shorter duration. This “hyper-amortization” of improvement costs will dramatically increase rents as tenant agencies pay considerably higher rent for essentially the same product.

Looking beyond the economic impact, the GSA policy shift will also generate significant management problems for the Government:

• Compounding the GSA Workload: With approximately 1000 leases expiring each year, GSA has struggled to keep up with the annual workload. As agencies reduce their lease terms, the annual caseload of expiring leases will skyrocket, and GSA will struggle to service its client agencies in a timely manner.
• Shifting Portfolio Management Responsibility to Tenant Agencies: The Federal Government will always have excess space in its leased portfolio as mission and facility requirements evolve over the course of time. By shifting to non-cancellable OAs, GSA is forcing tenant agencies to “fend for themselves” when space is no longer needed.

A More Effective Approach to Managing Risk

By adopting a one-size fits all non-cancellable OA policy for all new leases, GSA is abdicating its powerful insurance role in managing the Government’s civilian real estate portfolio. The policy change begs the question of the Agency’s value proposition in managing Federal real estate. Is the role of GSA to be the order-taker, acting simply as a pass-through between tenant agencies and private lessors? Or should GSA take a more proactive role that considers the needs of tenant agencies based on the owned and leased space under Government control?

If GSA intends to reduce the potential cost exposure of vacant lease space, far more effective approaches are already in use by other public and private sector organizations. These include:    

• Reassigning Vacant Space to Address Agency Requirements: The Federal Property and Administrative Services Act of 1949 gives GSA with the authority “to assign and reassign space of all executive agencies in Government-owned and leased buildings.”  More effective portfolio planning would help enable the Government to utilize its space more efficiently by reassigning existing space to address agency requirements.
• Sub-tenanting Vacant Space to the Private Sector: In the private sector, sub-leasing space is a common tool for mitigating the financial liability of vacant leased space. GSA can also backfill vacant leased space to private-sector tenants but rarely exercises this authority. One exception was in December 2015, when GSA identified a private sector backfill tenant for a million-square-foot vacant warehouse in Burlington, NJ, for the full term of the remaining lease, saving taxpayers more than $23 million. There is no reason why GSA should not be fully using this standard real estate practice to mitigate its vacant lease liability.
• Negotiating a Lease Buyout: When a leased space is no longer needed, commercial tenants sometimes negotiate buyout arrangements to reduce future lease liability. In certain situations, the Government and the landlord may have a mutual interest in the Government exiting the lease early. As GSA looks to mitigate the risk of vacant leased space, the Agency should determine where the Government may have an economic advantage in buying out specific leases.

GSA must take a more thoughtful and strategic approach that utilizes the full set of tools at its disposal to manage the Government portfolio more effectively. The move to non-cancellable OAs reflects a blunt instrument approach that does little to stem the tide of current space givebacks and simply transfers the economic risk to the tenant agencies. GSA has a statutory mandate to consider the real estate needs of each Federal tenancy within the larger context of a Government-wide portfolio strategy. GSA must not disregard this mandate.

Click here to view the PDF version of the white paper.

Click here to learn more about our brokerage team.

For questions about this white paper, please contact:
Norman Dong
Managing Director, FD Stonewater
[email protected]

Teamwork makes the dream work! Our FD Stonewater family united from across the country for our Annual Mid-Year Company-Wide Event! We kicked it off with an engaging Town Hall, discussing the latest market trends and showcasing our exciting initiatives and projects within our development, investment, and brokerage platforms. Then we embarked on an exciting day trip to Middleburg, VA, where we competed in an Amazing Nature Race at Salamander Resort & Spa, followed by an exclusive wine tasting at Boxwood Estate Winery. Special thanks to all who organized the activities, and a shoutout to the pink team for their victory in the race!

We are so grateful for the time spent with colleagues – especially those who traveled far. Nothing (certainly not Teams or Zoom!) can replace in-person comradery and connections – and we look forward to the next company event.

Click here to watch the video recap.

As we are in the midst of capital markets uncertainty, we wanted to share some of our current insights and opinions. Before the Silicon Valley Bank failure, the real estate market for debt and equity was still functioning albeit at lower volume levels. Only weeks later, many conversations with lenders, equity relationships, brokers, and investors suggest there has been significant degradation of capital flows, at least in part due to the Fed’s resolute march toward higher rates coupled with the resolve to keep rates higher for longer than many market participants expected, despite another large bank failure at First Republic.

What this means for current and future STAR Fund investors:

• First, rest assured that our cash and deposits that we control are FDIC-insured or U.S. Treasury invested programs with institutions that have not been under the pressure seen at SVB and First Republic. We have reviewed the banks we do business with both at the asset level and for our corporate accounts, and we are confident that no further changes need to be made at this time.
• We remain cautiously optimistic on the growth of the domestic economy, especially in the manufacturing and R&D sectors coming from intel off of our Logistics platform.
• The STAR Fund has no legacy asset issues. Both seed assets in the current portfolio were purchased at prices reflective of the increased interest rates in December 2022. Further, we swapped our base index rate at 4.11% for 5 years on both properties, mitigating interest rate exposure for that duration.
• Given market conditions, we believe that current pricing on acquisition opportunities should result in higher than targeted returns and potentially increased yields, provided there are willing sellers. Cap rates on certain assets are now closer to when we started the business 20 years ago. Pricing when you buy an asset is permanent, but the financing is temporary. We like today’s pricing and see an opportunity to purchase quality assets for the longer term.
• We do not expect this pricing to be a systemic shift, but rather a 12 to 18-month opportunity to buy quality mission critical assets at attractive longer term pricing levels.
• We are not changing our target yields or returns nor deviating from our max leverage targets, as we believe these remain appropriate for the long-term goals of the fund. These targets were selected with longer-term trends in mind. We continue to price deals on a relative risk basis, with current debt assumptions and lower leverage constraints.
• We continue to employ hedging strategies where appropriate across our portfolio and expect to do the same on future assets. The SOFR forward curve changes have been volatile and have presented what we view as unique opportunities to take some risk off the table. We are constantly evaluating the use of swaps, caps, and longer-term fixed rate financing. For example, on a FD Stonewater investment not held by the STAR Fund, we recently entered into a forward swap arrangement that will become effective upon the expiration of an existing swap years down the road, effectively insulating the asset from interest rate risk for an extended period.
• Select urban markets are certainly feeling pain. We are not taking a broad brush view on leasing strategies. Every asset has its own unique opportunities and challenges. Our focus has been on secondary markets where we continue to see leasing activity, an FD Stonewater asset even recently won the CoStar award for lease of the year in Richmond (click here to read more). Over the past few weeks our leasing pipeline activity has seen a noticeable uptick in inquiries.

While optimistic, we also remain attuned to the rapidly evolving market conditions and potential implications for the STAR Fund during these uncertain and challenging times.  Please let us know if you have any questions.

As a reminder, the STAR Fund is now approved on Schwab and Entrust platforms to be a custodian for investing through your standard and IRA accounts. If you are interested in investing in the Fund, please click here for more information.

Please also feel free to listen to some of the podcasts on which our principals have recently been featured (listen here) and follow us on LinkedIn.

Please note that the foregoing is not an offer to sell or a solicitation of an offer to purchase any securities of FD Stonewater STAR Evergreen Fund, L.P. (the “Fund”) or any affiliate, and any such offers will only be made pursuant to a private placement memorandum or similar disclosure document (“Private Placement Memorandum”) and other definitive documentation relating to any such offering. The foregoing information excludes material information that is detailed in the Private Placement Memorandum, including, but not limited to, risk factors. Prior performance is not indicative of future results. An investment in the Fund is speculative and involves a high degree of risk. Only investors who can withstand the loss of all or a substantial part of their investment should consider investing in the Fund.  Additionally, an opportunity to invest in the Fund is only available to (a) “accredited investors” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or (b) non-U.S. persons that meet the requirements set forth in Regulation S promulgated under the Securities Act.

By Norman Dong, Joe Delogu, and Anita Molino

Once again, the United States of America is facing the ominous threat of breaching the Federal debt ceiling in the coming months. As lawmakers stake out their positions on this evolving policy battlefield, there has been much speculation about the potential impact of a breach on the Federal Government and the overall economy. Here, we will examine the implications of a debt ceiling breach for owners and investors in Federally-leased property – and the corresponding implications for values, rents, and capital costs. 

The debt ceiling is a cap on the total amount of money that the Federal Government is authorized to borrow to fulfill its financial obligations. Because the United States runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. This includes money for rent payments on Government-leased real property.

As the Government faces the prospect of a debt ceiling breach, it is tempting to compare this financial crisis to the many previous standoffs about Government funding.  In the past, the Government has shut down when Congress failed to appropriate the annual funding, also known as budget authority, to sustain agency operations for the fiscal year. We have become familiar with many of the public images of prior Government shutdowns – IRS offices shuttered, the Washington Monument closed to visitors, etc. But in the case of GSA leasing, the Agency has always had sufficient budget authority carried over from the prior fiscal year – allowing it to make lease contract payments without disruption. As a result, the credit quality of Government-backed leased property has remained largely unaffected by prior shutdown drama.

A debt ceiling breach is a very different issue – with far greater consequences for the country and for owners and investors in Federal real estate. This is not about the authority to spend – the FY2023 Consolidated Appropriations Act already provides agencies with the ability to commit the Government though grants, contracts, salaries, and other financial obligations.  Raising the debt ceiling simply allows the Government to pay the bills it has already incurred.  For building owners who lease property to GSA and other Federal agencies, lease contracts would continue without disruption under a debt ceiling breach. But when the time comes for the Government to pay its rent, it may not have the cash to do so.

Failure to pay contract rent would be a breach of contract under the lease and a condition of default.  The byproduct of nonpayment of rent would clearly be harmful to any individual unpaid lessor, but the specter of unpaid Government obligations even generally within the financial system will have immediate effects on the entire system. For owners and investors in properties leased to the Federal Government, these immediate effects would include:

• Interest Rates Will Increase: If the Treasury Department is unable to make payments to lenders who hold federal debt — what is known as a default — the Government’s credit quality in the marketplace could diminish, thus causing risk-adjusted lending rates to increase, including loans to lessors of Government-occupied property. In addition, depending on the severity of any downgrade to the Government’s credit rating, lenders may be forced to “call” outstanding loans, based upon the tenant credit quality no longer meeting previously underwritten standards.
• Costs Will Increase:  Any increase in interest rates will ultimately translate into an increase in the rental rates the Government pays for the space it leases from the private sector. As leases come due for renewal or replacement, the higher cost of financing will ultimately be passed on to Federal agency tenants in the form of higher rents for the same product.
• Assets Will Lose Value:  A decrease in credit quality will cause not just an increase in borrowing costs but also an increase in capitalization rates associated with Government-occupied properties – both of which will cause asset values of Government-leased properties to decrease. Existing leases may also suffer an immediate loss of value as “mark-to-market” accounting rules for many investors will require them to reflect the diminished credit quality of their Government-leased property assets.

An actual breach of the debt ceiling is still considered an extremely remote possibility, and many are hoping that the Government will be able to avert a financial crisis. However, the fractious state of the United States Congress is still a concern, and current political brinksmanship may have unintended consequences. In 2011, the contention over the debt-limit resulted in the first-ever downgrade of the U.S. credit rating, even though a default was ultimately avoided. Despite the downgrade, significant capital continued to flow into U.S. Treasury securities, as they were still regarded as a safe and liquid asset class.

We may not be so fortunate this time around. There is already concern that some countries have turned away from the U.S. Dollar as the world currency and have turned to the Chinese Yuan. This latest impasse over the debt ceiling may have other consequences.  Another downgrade or suspension of the U.S. Government credit rating could possibly force investors in U.S. Treasury securities to sell based on internal investment guidelines that require minimum credit ratings on their holdings. If so, they could then be selling into a chaotic market causing major losses. Owners and investors of Government real estate might also feel the impact, as mortgage holders could similarly be forced to call the debt.

For now, Treasury is using “extraordinary measures” to manage its cashflow and stave off the day when the U.S. Government actually reaches its debt ceiling and no longer has the ability to borrow funds to pay its bills. As the debt-ceiling brinksmanship escalates with each passing day, many are hoping that cooler minds will prevail and lawmakers will agree to increase the debt ceiling as they have done 78 times since 1960. Despite the current drama, “the full faith and credit of the United States” today remains a secure and reliable return for owners and investors of Federal real estate. Hopefully, lawmakers will approve an increase to the debt ceiling in a timely manner so this will remain the case. 

• Norman Dong is a Managing Director at FD Stonewater and is the former Commissioner of Public Buildings at the General Services Administration.
• Joe Delogu is a Founding Partner of FD Stonewater and an established leader in the Federal Government real estate industry, with over 35 years of leasing, development, and investment management experience.
• Anita Molino is a Managing Partner at Bostonia Partners and has extensive capital markets experience focusing on real estate, energy, project finance, and the securitization markets.

For questions about this white paper, please contact:

Norman Dong

Managing Director, FD Stonewater

[email protected]

FD Stonewater announced today that the firm has been awarded and signed a lease to develop a new regional headquarters facility to house the U.S. Army Corps of Engineers (“USACE”) in downtown Mobile, AL. The development is expected to break ground within the next two months.

USACE will relocate from their existing regional headquarters at 109 St. Joseph Street to a new approximately 190,000 square foot build-to-suit office building located on the southeast portion of the Mobile Civic Center site, anchoring the intersection of Claiborne and Canal Streets.

Earlier this year, the Mobile City Council approved the ground lease for construction of an office building on the grounds of the historically significant Civic Center. FD Stonewater worked closely with the City of Mobile to coordinate the office development with the city’s Civic Center redevelopment master plan and secure the ground lease, which was signed on April 18, 2023. Mobile City Council also approved funds for a new 1,000-car parking facility located adjacent to the new USACE building.

The new regional headquarters will meet modern design, sustainability, and federal security standards along with USACE’s programmatic requirements for secure office space, special use areas, and amenity spaces. The property will house multiple divisions of the USACE and can accommodate the agency’s future workforce growth projections. In addition, the project contemplates outdoor amenity space as well as a landscaped promenade.

“It is very exciting to see USACE continuing to invest in downtown Mobile, and we look forward to working closely with their team and FD Stonewater to move this great project forward,” Mobile Mayor Sandy Stimpson said. “The City of Mobile has a long history with USACE, and we know they will be an excellent partner as we continue to redevelop and revitalize the entire Mobile Civic Center site.”

Richard Mann, Principal of Development at FD Stonewater, further commented, “our team is very pleased to partner with the City of Mobile and USACE on this important federal development. Our intent is to deliver a highly functional and efficient headquarters facility that meets the agency’s requirements and supports the City’s long-term redevelopment goals for the Civic Center site, while respecting the surrounding neighborhoods of downtown Mobile.”

FD Stonewater is partnering with architecture and design firm Wight & Company, civil engineering firm Mott MacDonald, and General Contractor Harvey-Cleary Builders.

Architectural renderings (ARB Submittal)

By Norman Dong, Chad Habeeb, and Joe Delogu

In his March 2022 State of the Union address, President Biden declared “It is time for America to get back to work and fill our great downtowns again with people. People working from home can feel safe and begin to return to their offices. The vast majority of Federal workers will once again work in person.”  Since that time, the situation has largely remained unchanged with significant numbers of Federal employees continuing to work primarily from home. This has left many owners and investors of commercial real estate wondering if and when agencies actually will follow through on the President’s early 2022 commitment to return Federal employees back to the workplace.

OMB Memorandum M-23-15, released on April 13, 2023, provides some additional guidance to Federal agencies on returning to the workplace. The OMB memo encourages Federal agencies to consider the balance between in-person work and remote work in the context of organizational health and performance. According to the memo, “It is the expectation that…agencies will continue to substantially increase meaningful in-person work at Federal offices, particularly at headquarters and equivalents, while still using flexible operational policies as an important tool in talent recruitment and attention.” The guidance also states how “Agency workforces are generally expected to increase meaningful in-person work that is purposeful, well-planned, and optimized for in-person collaboration…” These statements seem reasonable enough and, as many news outlets have been reporting, suggest that perhaps the Federal Government is finally catching up to at least a hybrid approach where most private companies and state/local governments have been for a while now.

However, much of the language in the OMB memo clearly aims to “soften the blow” for those who continue to advocate for the status quo. The OMB guidance contains no clear targets for increasing the numbers of Federal employees working in the office. Nor does it provide any clear guidance on the number of days employees should be working in the office vs. remotely, as most private companies and state/local governments have done.  Instead, the OMB memo, which weighs in at 19 pages, places considerable emphasis on the need for agencies to conduct additional evaluation and studies on the operational impacts of telework before making any final decisions.

The approach to returning employees back to the office outlined in this latest OMB memo largely mirrors the approach outlined in OMB’s original guidance on this topic back in June 2021. Both then and now, OMB provided maximum deference to Federal agencies to devise their own policies on remote work based on organizational mission and function. Both then and now, the guidance from OMB fails to articulate any minimum standards or “guardrails,” leaving agencies to figure it out entirely for themselves. While the OMB memo recognizes the complex array of mission and functions among Federal agencies and rightfully steers clear of a “one size fits all” mandate, it nevertheless fails to provide any clear direction to support Agencies in fulfilling President Biden’s mandate for the vast majority of Federal workers to return to the workplace.

The lack of minimum standards or guardrails may be leading to some unintended consequences for the Federal agencies. The tight labor market and competition for talent at the Federal level have compelled agencies to offer maximum telework to attract and retain employees. OPM Director Kiran Ahuja has emphasized the importance of making telework available to eligible Federal employees and warned that Feds are “agency-hopping” to more telework-friendly offices.  But in the absence of clear government-wide direction and minimum standards on the balance between employees working in the office and working from home, no one should be surprised as Federal agencies are forced to compete with one another to offer the most generous telework programs.

For the commercial real estate industry, which has shouldered the economic impact of the Federal telework for more than three years, this latest news from OMB undoubtedly will be a huge disappointment. In the aftermath of the pandemic, the Federal government has doubled-down on the effort to reduce its real estate footprint, a downward trend that has continued over the past decade. The reduction of Federally assigned (and often not occupied) space has had a clear and quantifiable impact on market dis-absorption and property values. With this latest “guidance” from OMB, we can expect continued market dis-absorption continuing into 2025, and perhaps even longer depending on the outcome of the next election. As the Federal government continues to avoid providing clear direction to return employees to the workplace, the commercial real estate industry, and the American taxpayer, will ultimately bear the burden.

This latest memorandum from OMB fails to establish sufficient clarity and urgency to bring Federal employees back to the workplace. Over the near term, we see no meaningful divergence from the status quo. Until OMB is willing to provide clear direction on this issue, the Government will continue to fall short of delivering on President Biden’s commitment.

For questions about this white paper please contact:

Norman Dong

Managing Director, FD Stonewater

[email protected]

Exciting news! One of our assets has been awarded the 2023 CoStar Impact Award for Lease of the Year in Richmond. Read all about it in the linked CoStar News article and discover how this achievement is making a positive impact on the city’s commercial real estate market.

Click here to read more.

Check out this week’s episode of The Weekly Take featuring FD Stonewater Co-Founder and Principal Jeff Toporek! In this episode, Jeff provides insight into what it takes to raise capital, especially at a time of high market uncertainty, and shares how the firm’s investment strategy has evolved over the past 20 years. Thank you to Spencer Levy and JM Schapiro for an engaging discussion and for the opportunity!

Click here to access the podcast.

About The Weekly Take

The Weekly Take invites industry, economic, and subject matter experts to share their unique insights on what matters most today in commercial real estate. Spencer Levy is a Global Client Strategist and Senior Economic Advisor for CBRE and is considered one of the most insightful commentators on issues of importance to commercial real estate.

About the episode

Patience: The key to raising investment capital today (35 min)

“Investing in commercial real estate always entails a complex mix of science and art. FD Stonewater principal Jeff Toporek and Continental Realty Corp CEO JM Schapiro share their secrets for prudently raising capital and adroitly putting it to work at a time of high market uncertainty.”

Copyright © 2023 CBRE. All rights reserved.

Disclaimer

This is not an offer to sell or a solicitation of an offer to purchase any securities, and any such offers will only be made pursuant to a private placement memorandum or similar disclosure document and other definitive documentation relating to any such security. The statements in this podcast include the speaker’s personal opinions and predictions, which by their nature are uncertain, and there can be no assurance that actual events will occur as predicted.

The FD Stonewater STAR Evergreen Fund, L.P. (the “STAR Evergreen Fund”) formally announced Michael McNamara, Daniel Philips, and Nancy McGrath as initial members of the fund’s Advisory Committee.  The Advisory Committee’s primary role is to review and opine on conflicts of interest related to the fund.  The fund launched in December 2022 to pursue a Single Tenant Active Return (STAR) strategy focused on assembling a diversified portfolio of mission-critical single-tenant real estate assets in U.S. secondary and tertiary markets across industrial, government, research and development, and office sectors. In December 2022, FD Stonewater announced the first closing of the STAR Evergreen Fund in the amount of $19 million, simultaneous with the acquisition of two seed assets.

Michael McNamara has a career spanning four decades leading numerous global real estate investment platforms, most recently as the Senior Managing Director and Global Head of Real Estate Investments for Manulife Investment Management. In that role, Mr. McNamara was responsible for the development, execution, and portfolio management of the company’s global real estate investment strategies for both the General Account as well as institutional investors that include both public and private pension funds. Prior to joining Manulife, Mr. McNamara worked at Brookfield Office Properties and was responsible for all U.S. investment activity. Before joining Brookfield Office Properties, he spent nine years as a Managing Director at Lehman Brothers and 20 years at Equitable Real Estate Investment Management, Inc. Over the course of his career, Mr. McNamara has been responsible for transactions valued at over $100 billion. 

Daniel Philips is co-founder and Chief Executive Officer of JDJ Capital Management, a private investment firm located in New York City. Prior to forming JDJ Capital in 2006, Mr. Philips worked in the investment banking group at Bear, Stearns & Co., with a focus on industrials and real estate. Mr. Philips began his career as a corporate lawyer with Cadwalader, Wickersham & Taft, where his practice concentrated on mergers, acquisitions, and securities offerings. Mr. Philips currently serves on the Board of Directors of Air Wisconsin Airlines, LLC, and AWAC Aviation, Inc., and is also on the Advisory Board for Emory University’s Goizueta Business School. Mr. Philips received his BBA from Emory University and his JD and MBA from The George Washington University.  

Nancy McGrath is General Counsel for Peterson Companies and serves on the company’s Executive, Investment, and Finance Committees. Nancy concentrates her practice on all aspects of real estate development including the structuring of complex mixed-use projects, land and building acquisition and disposition, joint ventures, financing, construction, leasing (government and private sector), project management, and operations. She also advises the company on family office, general business, strategic and corporate matters. Prior to joining Peterson Companies Nancy was an associate at the law firm of Melrod Redman & Gartlan. Nancy received her BA degree magna cum laude in History and Political Science from Duke University and her Juris Doctor degree from the University of Virginia Law School. 

Jeffrey Toporek, Co-Founder for FD Stonewater said “We are incredibly grateful to Mike, Dan, and Nancy for their continued commitment to, and support of, FD Stonewater and the STAR Evergreen Fund. Together, they bring significant diversified perspectives, experience, and leadership as well as exemplary reputations to the Advisory Committee’s role of reviewing and opining on conflicts. Over the past 20 years, Mike, Dan, and Nancy have each provided invaluable guidance to FD Stonewater and we are pleased to formalize these relationships with their membership in the fund’s Advisory Committee.” 

FD Stonewater has acquired, asset managed, and/or developed 5.6 million square feet of single-tenant assets valued at $1.3 billion. FD Stonewater’s national capabilities encompass over 8 million square feet of experience in more than 40 secondary and tertiary markets across the country.

For more information on the STAR Evergreen Fund and our Advisory Committee, please visit https://fdstonewater.com/star-fund/.

Disclaimer 

Please note that the foregoing is not an offer to sell or a solicitation of an offer to purchase any securities of FD Stonewater STAR Evergreen Fund, L.P. (the “Fund”) or any affiliate, and any such offers will only be made pursuant to a private placement memorandum or similar disclosure document (“Private Placement Memorandum”) and other definitive documentation relating to any such offering. The foregoing information excludes material information that is detailed in the Private Placement Memorandum, including, but not limited to, risk factors. Prior performance is not indicative of future results. An investment in the Fund is speculative and involves a high degree of risk. Only investors who can withstand the loss of all or a substantial part of their investment should consider investing in the Fund.  Additionally, an opportunity to invest in the Fund is only available to (a) “accredited investors” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or (b) non-U.S. persons that meet the requirements set forth in Regulation S promulgated under the Securities Act. 

2022 was an extremely positive year for FD Stonewater. We continued to grow our core development, investment and brokerage business lines while expanding into new verticals where demand shows no sign of slowing, such as logistics, industrial, and multifamily. While diversifying, we remain disciplined, focusing on new opportunities that reflect our strengths and integrated capabilities. The outlook for 2023 is extremely bright as we continue to capitalize on our cross-platform model as the engine for continued growth and expansion.

FD Stonewater announced the first closing of the FD Stonewater STAR Evergreen Fund, L.P. (the “STAR Evergreen Fund“) in the amount of $19 million, simultaneous with the acquisition of two seed assets.

The fund closed on an 83,000 square foot mission critical research and development, office, and specialized manufacturing facility located adjacent to Redstone Arsenal in Huntsville, AL. The building is 100% leased to a leading defense contractor and was purpose-built for the tenant in 2020. The tenant utilizes the facility to service government contracts.

The fund also closed on the second seed asset, a 55,624 square foot Class A headquarters building 100% leased to Harvey | Harvey-Cleary, a full-service general contractor based in Houston, TX, and leased through 2036. The headquarters is located in Houston’s Westchase submarket and benefits from the area’s considerable economic growth and proximity to major transit hubs.

The fund has a Single Tenant Active Return (STAR) strategy with a focus on assembling a diversified portfolio of mission-critical single-tenant real estate assets in U.S. secondary and tertiary markets across industrial, government, research and development, and office sectors.

Owen Burke, Principal and Director of Asset Management

“The team’s deep experience in investing across sectors and geographies will enable us to build a portfolio of high-quality, mission-critical assets for the fund. Additionally, the fund will benefit from the firm’s unique fully integrated cross-platform approach by utilizing our investment, asset management, development, and brokerage platforms at various stages of a deal. Our cycle-tested strategy focuses on acquiring resilient assets with both durable cash flows and defined opportunities to seek value enhancement.”

Andrew Schwartzman, Principal and Director of Acquisitions

“We are excited to announce the successful acquisition of both seed assets. Both facilities fit the single-tenant, mission-critical objective that we are actively pursuing for the fund. With the combination of compelling tenant stories and strong underlying real estate fundamentals, these deals are representative of FD Stonewater’s single-tenant strategy that has realized tremendous success over the past 20 years.”

FD Stonewater has acquired, asset managed, and/or developed 5.6 million square feet of single-tenant assets valued at $1.3 billion. FD Stonewater’s national capabilities encompass over 8 million square feet of experience in more than 40 secondary and tertiary markets across the country.

FD Stonewater announced today that the firm has launched a new value-add evergreen fund targeting single-tenant assets, FD Stonewater STAR Evergreen Fund, L.P. (the “STAR Evergreen Fund”). The fund will pursue a Single Tenant Active Return (STAR) strategy and will focus on assembling a diversified portfolio of mission-critical single-tenant real estate assets in U.S. secondary and tertiary markets and will be diversified across industrial, government, research and development, and office sectors.

Click here to learn more about the fund and invest today.

FD Stonewater’s repeatable single-tenant active return strategy has historically generated value through the identification of underpriced assets and an active management approach in a traditionally passive asset class. FD Stonewater has acquired, asset managed, and/or developed 5.6 million square feet of single-tenant assets valued at $1.3 billion. FD Stonewater’s national capabilities encompass over 8 million square feet of experience in more than 40 secondary and tertiary markets across the country.

The STAR Evergreen Fund will be primarily led by four FD Stonewater principals: Owen Burke, Andrew Schwartzman, David Stade, and Jeffrey Toporek. The firm’s founding partners have worked together for 25 years and bring over 80 years of combined experience in investment acquisitions and asset management.

Principal of Investment and Co-Founder Jeffrey Toporek 

“We are excited to publicly announce the STAR Evergreen Fund. We believe our demonstrated and consistent execution of the single-tenant strategy creates a unique investment opportunity, especially in today’s market of noise and volatility.  For the first time in 20 years, we are giving outside investors the ability to invest in this strategy.”

Owen Burke, Principal and Director of Asset Management

“The team’s deep experience in investing across sectors and geographies will enable us to continue to build a portfolio of high-quality, mission-critical assets. Additionally, the fund will benefit from the firm’s unique fully integrated cross platform approach by utilizing our investment, asset management, development, and brokerage platforms at various stages of a deal. Our cycle-tested strategy focuses on acquiring resilient assets with both durable cash flows and defined opportunities to seek value enhancement.”

Adnan Virani, Director of Investor Relations

“We believe the STAR Evergreen Fund is coming to the market with a differentiated offering led by mission-critical tenant stories, strong credits, and lease terms that should provide strong cash yields over a full market cycle of 10-15 years.  We think this type of exposure is a great fit across investor types and has a perpetual and permanent place in private real estate allocations.”

Disclaimer: Please note that the foregoing is not an offer to sell or a solicitation of an offer to purchase any securities of FD Stonewater STAR Evergreen Fund, L.P. (the “Fund”) or any affiliate, and any such offers will only be made pursuant to a private placement memorandum or similar disclosure document (“Private Placement Memorandum”) and other definitive documentation relating to any such offering. The foregoing information excludes material information that is detailed in the Private Placement Memorandum, including, but not limited to, risk factors. Prior performance is not indicative of future results. An investment in the Fund is speculative and involves a high degree of risk. Only investors who can withstand the loss of all or a substantial part of their investment should consider investing in the Fund.  Additionally, an opportunity to invest in the Fund is only available to (a) “accredited investors” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or (b) non-U.S. persons that meet the requirements set forth in Regulation S promulgated under the Securities Act. 

The DC region is facing a tsunami of federal shadow vacancy – vacant space not being captured in widely circulated market reports. In the aftermath of the pandemic, government agencies are swiftly adopting telework and aggressive flexible work policies. While some private sector companies are pulling back on telework initiatives, many federal agencies are doubling down by memorializing these benefits in union agreements and entrenching them into agency-wide employment policy. As a result, tenant agencies are giving back space to the GSA at a record clip.

Our team has compiled a list of large blocks of leased and owned space (50,000 square feet or greater) that have been released back to GSA, are in the process of being released to GSA, or are planning to be released in the near future. The list includes 36 instances of space givebacks and reductions known to our team in both owned and leased assets in Washington, DC, and Northern Virginia. Of the leases reflected in our list, the firm term remaining ranges from 1 year to 15 years.

Click here to download the report.

WHAT IS A REDUCTION?
A reduction is categorized as an agency allowing a lease to expire (i.e., no renewal) or choosing to downsize significantly at its natural expiration date. The space is not carried on GSA’s vacancy portfolio but instead released back to the market.

WHAT IS A GIVEBACK?
A giveback is when a tenant agency releases space back to the GSA prior to the firm lease term ending or releasing space to GSA in a federally-owned asset. In a market context, space given back to GSA by tenant agencies should be included in the “shadow vacancy” calculations for the overall market – although technically still “under lease”, nobody is in occupancy and conducting business inside the premises.

WHY IT MATTERS
Space givebacks force GSA to either carry vacancy on their books for the remainder of the firm term of the lease or backfill the space with another agency, presumably cannibalizing other leased space. Reductions create additional negative net absorption. This flood of vacancy injected into a market awash with Class B and C space will no doubt have a profound impact on future leasing projections. In DC alone, the square footage reductions identified in this report will increase the vacancy rate among Class B and C assets by up to 14%. However, opportunity remains as not all agencies are shedding space and the GSA still has 35 million square feet of active leases in DC and Northern VA. There is anticipated federal growth as a result of a long-term response to the pandemic, increasing agency budgets and missions, escalating global tensions, and an expansion of government services. If you are a building owner with a pending federal lease expiration or are sitting on vacancy, it will take considerable skill and knowledge to navigate through this coming environment.

For questions about this article please contact:
Chad Habeeb, Director of Federal Leasing
FD Stonewater
[email protected]

Dan Cain has joined the firm as Executive Managing Director and will assume a leading role within the firm’s Development platform, with a primary focus on expanding the company’s logistics and industrial initiative.

Prior to joining FD Stonewater, Dan was a Director at Matan Companies, a private commercial real estate investment fund with $1.4 billion AUM consisting of industrial, life sciences, multi-family, and office assets located in the Mid-Atlantic region.

Dan is an industry veteran and comes to FD Stonewater with nearly 20 years of commercial real estate development, investment, and asset management experience. During his eight-year tenure at Matan Companies, Dan managed the 6 million square foot portfolio from acquisition and development through disposition and was accountable for maximizing returns and meeting fund, joint venture, and investor objectives.

Prior to joining Matan Companies, Dan spent over five years at JBG Smith (NYSE: JBGS) and four years at Armada Hoffler (NYSE: AHH).Dan earned his Master of Business Administration from The University of Virginia, Darden School of Business, and a Bachelor of Business Administration from James Madison University.

Dan Cain, FD Stonewater Executive Managing Director:

“I’m delighted to join FD Stonewater, as this is a unique opportunity to unite with an entrepreneurial, growing firm with a proven track record and help expand the firm’s development capabilities in different vertical. FD Stonewater maintains a strong reputation in the market while continuing to expand their national capabilities and I hope to build on this success as the firm continues to grow.”

David Alperstein, FD Stonewater Principal:

“Dan is a tremendous addition to the team, and we expect him to make an immediate impact on the business, particularly within our development platform. We are confident that Dan’s analogous experience across the real estate development and investment spectrum will boost FD Stonewater’s executive team, and he will prove to be a tremendous resource to the entire company.”

Claiborne Williams, Lead Development Principal:

“We could not be more pleased to welcome Dan to the firm. His experience in development, financing, and acquisitions directly correlates to our firm’s core capabilities and we are confident that his expertise will also help us achieve great success in several new ventures that we continue to pursue.”

To view the press release, click here.

Members from our development team joined representatives from the Borough of Somerville, emergency services chiefs, and Somerset County Commissioners to participate in a ceremonial groundbreaking for the new Somerville Emergency Services Facility. The 45,000 SF build-to-suit Emergency Services Facility will allow for a more centralized response, moving the Borough’s fire companies, Police Headquarters, First Aid Squad, and Office of Emergency Management into one shared facility. The groundbreaking marks the culmination of many years of planning and community partnerships. Our development team is honored to be a part of this important local project!

Project Team: SmithGroup, Harvey | Harvey-Cleary Builders, Kimley-Horn

Last week, the entire FD Stonewater team convened in DC for an All-Hands Company Event! Our employees traveled from around the country to participate in a series of team-building events. We kicked it off with a “town hall” presentation where different team members shared the company’s YTD accomplishments and discussed the future for each of our business lines – brokerage, development, and investment. We also traveled to Annapolis for a fun day sailing on the Chesapeake Bay and enjoyed an authentic Maryland crab feast. Thanks to all who organized the events, and looking forward to capping off another great year at FDS!

Click here to watch the recap video.

FD Stonewater recently completed the development of a 46,000 SF ground-up build-to-suit facility to house the Pennsylvania State Police in Skippack, PA. The three-building facility is located northwest of Philadelphia and consists of a police station, state-of-the-art training center, task areas, and an indoor firing range. After the lease award, FD Stonewater acquired the previously undeveloped land from the owner to subdivide a portion of the land. During the due diligence process for the land acquisition, it was revealed that the 40-acre site was partially covered in wetlands. The subdivision allowed FD Stonewater to acquire the most developable acreage within the site while mitigating the environmental impact on the wetlands.

UNIQUE PROJECT FEATURES

• State-of-the-art training center
• Indoor Firing Range
• Secure Evidence Room
• Secure Weapons Storage

Thank you to our entire project team for their efforts in bringing this project across the finish line!

Wight & Company, Harvey | Harvey-Cleary, Graf Engineering, ESC Limited, and Building EnergetiCx

On May 16, 2022, members of our development team joined elected officials, representatives from VA Central Office, VA NJHCS, Ocean County, and local Veteran groups to participate in a ceremonial groundbreaking for the new Toms River VA Clinic.

The new 68,000-square-foot clinic will serve the area’s Veteran population and will offer comprehensive medical care including primary health care, dental care, women’s health care, mental health counseling, and physical therapy. The Toms River clinic groundbreaking marks the culmination of many years of planning and community partnerships. Erecting a new, larger VA clinic in Ocean County expands services and permits closer-to-home care for many more Veterans.

Preliminary architectural rendering, courtesy of SmithGroup

DISTINGUISHED GUESTS

• Congressman Andy Kim – Third Congressional District of New Jersey
• Congressman Chris Smith – Fourth Congressional District of New Jersey
• Maurice B. Hill – Mayor, Toms River, New Jersey
• Dr. Steve Lieberman, VHA Deputy Under Secretary for Health
• Dr. Joan Mclnerney, Network Director VISN 2
• John A. Griffith, Acting, Executive Medical Center Director

FD Stonewater has completed the acquisition of the Alside Distribution Center at 7550 East 30th Street in Yuma, Arizona. The 222,554 square foot, single-tenant manufacturing and distribution facility is 100% leased to Associated Materials, LLC, the parent company to the user Alside Window Company. The property was built-to-suit for Alside in 2005, and the long tenure at the property reflects the facility’s mission criticality to operations and proximity to high growth southwest markets.

The industrial building has 25-foot clear heights throughout the warehouse, an internal crane system, 50-foot column spacing, 22 dock high truck doors, and 60-foot concrete truck apron. The property includes 6,000 square feet of recently renovated office space, new restrooms, and exterior enhancements. The building has expansion capability for another 55,000 square feet to accommodate any future tenant needs.

FD Stonewater Principal Owen Burke commented, “We are excited to enter the Yuma, AZ, market, and pleased to acquire this high-quality industrial facility. Our investment and development teams have extensive relevant experience acquiring single-tenant product and leveraging in-house development capabilities to successfully execute similar business plans. We have been focused on strategic investments in the industrial and manufacturing space and the Alside facility is both a perfect fit for our strategies and well positioned to benefit from tailwinds in industrial real estate.”

FD Stonewater recently completed the phased redevelopment of the U.S. Drug Enforcement Administration (DEA) headquarters on behalf of ownership. The two-building complex at 600-700 Army Navy Drive, also known as Lincoln Place, is a Class A, 511,000 square foot, highly-secure facility located in Arlington County’s Pentagon City neighborhood. FD Stonewater also represented ownership on the 15-year lease renewal for Lincoln Place in what was the largest lease transaction in Northern Virginia in 2018. The redevelopment of Lincoln Place enables the agency to modernize their law enforcement mission and to implement efficiencies that will allow 400 hundred additional staff to work at the headquarters complex, increasing the County’s employment base and supporting the agency’s expanding mission.

At the onset of the deal, ownership committed to significant capital upgrades with the goal of transforming Lincoln Place into a best-in-class government-leased facility. The redevelopment includes secure office with 20,000 SF of Sensitive Compartmented Information Facility (SCIF) space, café and fitness center amenities, courtrooms, agency museum, as well as building systems upgrades for both buildings. The facility meets Federal Security Level IV requirements. One of the more unique components of the project, the 12,000 square foot DEA Museum is an interactive state-of-the-art exhibit space that displays the history of the agency and the evolution of their mission while addressing key agency themes.

“The DEA has been a longstanding part of Arlington’s federal presence, and we are thrilled to see the agency choose to remain here in Arlington and make significant improvements to enhance its home here,” said Arlington County Board Chair Matt de Ferranti. “This newly redeveloped facility not only maintains a large employment presence that will support many other businesses in the Pentagon City neighborhood, but also entices additional visitors through the reimagined DEA Museum.”

Securing swing space for DEA headquarters staff was necessary to the success of the project. FD Stonewater’s leasing team secured 75,000 square feet of swing space at 2200 Crystal Drive and negotiated a 2-year term with flexible extension options. FD Stonewater provided turnkey swing space to the agency for the duration of the headquarters redevelopment and coordinated the agency’s move to the temporary space.

The DEA redevelopment assignment marks the continued expansion of FD Stonewater’s federal development and construction management platform. FD Stonewater has delivered other large-scale federal projects on behalf of building owners this year, including the 500,000 square foot redevelopment and restack for the National Institutes of Health (NIH) campus in Bethesda, MD.

FD Stonewater teamed up with SmithGroup as Architect-of-Record and HITT Contracting as General Contractor. The project delivered on time and on budget in September 2021.

Ben Dineen, Principal and Director of Development at FD Stonewater, commented, “Our development team was intensely focused on delivering the highest degree of service, bringing our ownership mentality to the project to optimize costs for ownership and the Government, while also leveraging our specialized government experience and technical capabilities to meet the DEA’s unique requirements.”

Claiborne Williams, Principal at FD Stonewater, added, “This redevelopment assignment fully aligns with our core development platform, as FD Stonewater has a rich history of providing services to owners with Federal Government occupants. We are proud of this team, and especially honored to be a part of this project, while also maintaining this value-critical occupancy for ownership and positively impacting Arlington County at large.”

Joe Delogu, Principal at FD Stonewater, led the lease negotiations on behalf of ownership for the long-term renewal at Lincoln Place. A long-time Arlington County resident, Delogu commented, “this lease renewal and the subsequent capital investment by ownership at Lincoln Place was vital for the County and its economic growth. The redeveloped facility creates an enhanced employment base while keeping a major government tenancy, two big wins for Arlington County that will spur further growth.”

Photo credit: Judy Davis, Studio HDP

FD Stonewater has completed the acquisition of 6000 Spine Road in Boulder, Colorado. The fully leased, 60,000-square foot, office building is located in Gunbarrel Business Park and surrounded by numerous Fortune 500 companies in the life science and technology industries.

Despite market uncertainty caused by the pandemic, Boulder’s office market has remained resilient, largely due to stable and diverse economic drivers, high barriers to entry, and a robust talent pipeline. The opportunity to acquire an office asset that features healthy cash flow and several paths to upside at a material discount to replacement cost in Boulder was compelling.

FD Stonewater Principal Andrew Schwartzman commented, “We are pleased to add this asset to our portfolio and excited to enter the Boulder market. Occupancy at the property went from about 70% to 100% during our acquisition pursuit, which demonstrates the health of the market, and we believe there are further upside opportunities as well. Our team continues to evaluate unique, strategic opportunities in high-growth secondary markets across the country. This property fits well into that strategy and is an exciting addition to FD Stonewater’s investment portfolio. We hope it’s the first of several in Boulder.”

FD Stonewater has completed the acquisition of the Harvey | Harvey-Cleary headquarters, a 55,624-square foot, Class A suburban office building in Houston’s Westchase submarket. The headquarters property is 100% leased to Harvey | Harvey-Cleary, a privately held, full-service general contractor with offices in Houston, Austin, San Antonio, and Washington, DC. The 15-year sale-leaseback was completed as part of FD Stonewater’s single-tenant investment program and caps more than a year and a half of collaboration on the deal.

Harvey | Harvey-Cleary has been headquartered in Houston since its founding in 1957. The company acquired the Westchase vacant property in 2019 and subsequently completed significant capital upgrades and interior renovations transforming the property into a modern, collaborative workspace. The building benefits from the area’s considerable population and economic growth and close proximity to major vehicular arteries and transit hubs.

FD Stonewater Principal Andrew Schwartzman commented, “We are excited to see this deal come to fruition after many months of collaboration with Harvey | Harvey-Cleary. We greatly value our relationship with them as a trusted service provider and partner. With a stabilized, reputable tenancy and strong underlying real estate fundamentals, this deal is representative of FD Stonewater’s single-tenant strategy that has realized tremendous success.”

Harvey | Harvey-Cleary President, Kevin Rogge, stated, “our relationship with FD Stonewater has grown steadily over the past decade and has been marked with many great successes. This deal is really the culmination of many years of collaborating on business pursuits. We are looking forward to seeing this through and continuing our strong partnership.”

By Norman Dong | Managing Director at FD Stonewater

Federal agencies are facing significant uncertainty about their space and facilities needs in the aftermath of the pandemic. Does the recent increase in telework reflect a temporary accommodation to get through the current public health crisis, or a more permanent way of doing business? After a decade of reducing agency space utilization, has the time come to reverse course to allow for more space and separation? As government real estate planners and decision-makers try to understand longer term impact of the pandemic, the time has come to re-consider the conventional thinking about how best to support the space and facilities needs of Federal agencies.

Without doubt, the remote work “proof of concept” that we have experienced over the past year will have lasting implications. Many working professionals have lived the benefits (and shortcomings) of remote work, and few may be willing to walk away from the increased flexibility and reduce commute time they have grown accustomed to during the pandemic. As a result, employers, including Federal agencies, must be willing to accommodate some increased level of remote work to remain competitive in the labor market. As both the private and public sectors recognize the economic benefits of further reductions in real estate utilization from increased telework, employers seem willing to accept this new way of doing of business.

Although we will likely never fully revert to the workplace centric model we once knew, neither will we adhere to the scale of remote work experienced during the height of the pandemic. According to a recent Gensler workplace survey, at least 80 percent of employees want to return to the office at least one day a week. After a year of working in isolation, many of us have grown weary of endless video calls and the distractions of the barking dog or the neighbor’s lawnmower. Moreover, some agency missions, including law enforcement, lab research, national security functions, and public facing functions, cannot be performed effectively through long-term telework. For many people, working from home will never be able to provide the workplace setting that fosters the type of communication, collaboration, and innovation to advance agency missions.

As the pandemic began, there was some speculation that agencies might need to expand their real estate footprint to allow for more private offices and greater physical separation among employees. Instead, we have seen agencies take a practical approach to de-densify the workplace by creating shifts of employees throughout the workweek instead of undertaking the more expensive proposition of re-designing the existing layout. As the Federal Government re-examines the need to provide a dedicated personal workspace for the entire workforce, we can assume that agencies will still need space, but less than what they were using in the past. The question of exactly how much less remains an open question.

The Federal experience under the pandemic warrants a fresh look at the traditional approach to new Federal construction projects like the Department of Homeland Security at St. Elizabeths or other large agency consolidations. After a year where most of the workforce has worked remotely, is the original value proposition of co-locating thousands of employees across multiple bureaus and divisions still valid? In the future, these new Federal construction projects may still be warranted, but in a smaller, modified form. While Federal construction makes sense for the most essential and specialized functions, it is increasingly clear that general and administrative functions can be accommodated more effectively through traditional leasing arrangements, telework, or the rise of flexible co-working solutions.

Government real estate officials also should reconsider the long- term leasing mandate that has governed Federal leasing for almost a decade. In the coming few years, agencies will face the decision to renew, replace, or extend their existing leased space – all of which can be expensive, multi-year commitments. Today, longer lease terms may not be appropriate as we continue to deal with the global health crisis. Amid all this uncertainty, the ability to maintain maximum flexibility is paramount.

As government real estate planners and decision-makers try to determine the long-term impact of the pandemic, some may be feeling pressure to have this all figured out by now. It will take several years before we understand how the pandemic will impact agency space requirements over the longer-term. Simple human nature compels us to want answers now, but we should resist the temptation to decide too quickly, and we should continue to seek better information before making long-term facility decisions. That is not to suggest that we disregard current agency needs, but instead consider the growing number of flexible options to support agency office space requirements without making longer-term commitments we are not ready to make.

While the scale and scope of Federal telework over the past year will influence future thinking about Federal real estate, we should also consider whether this scale of working from home has enabled Federal agencies and employees to do their best work. Recent events underscore the important work of our Federal agencies – whether it is responding to the public health crisis, processing benefits payments, dealing with the impact of natural disasters, or protecting our national security. In the words of one government real estate official, our objective should be to create a working environment that is “as good, if not better” than what we knew prior to the pandemic. Amid all this uncertainty, one thing is clear – our Federal real estate strategy must never lose sight of how best to support agencies in performing this mission critical work.

Norman Dong is a Managing Director at FD Stonewater and is the Former Commissioner of the U.S. General Services Administration, Public Buildings Service.

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FD Stonewaterhas been recognized in the 2020 Greater Washington Area Best Places to Work, an awards program presented by the Washington Business Journal. FD Stonewater landed at number four on the list of mid-sized companies in the region.

Select employers from the Greater Washington Area were named winners of the awards program and were honored during a virtual event held on August 27, 2020. The winning organizations were recognized for their exceptional workplaces, comprehensive and creative benefits, and commitment to developing top talent. 

Award applicants were evaluated and ranked across several research-based categories according to the number of Greater Washington Area employees. The program measured several workplace factors that impact employee engagement and satisfaction and honored companies in the region that demonstrate excellence in areas such as workplace experience, benefits and perks, employee engagement, and management practices. 

FD Stonewater was one of just 30 organizations that were honored in the mid-sized business category. Over 400 companies participated in this year’s program, representing a cross section of industries including commercial real estate, technology, financial services, and consulting.

About 2020 Best Places to Work  

Best Places to Work is an innovative publication and awards program produced by the Washington Business Journal.  The rankings were determined by surveys that went directly to employees who answered a series of questions.  The survey was administered online by the employers and through a service provided by Quantum Workplace, our research partner.  The rankings are numeric based on Quantum’s scoring process.  By ranking companies and sharing best practices we facilitate idea sharing and help other companies learn from the best.  

Portland, ME – July 22, 2020 – FD Stonewater, J.B. Brown & Sons, and the U.S. Department of Veterans Affairs (VA) recently held an official groundbreaking ceremony at the site of the new VA Community-Based Outpatient Clinic (CBOC), located at 141 West Commercial Street in Portland, Maine.

Once opened, the clinic will replace and consolidate the existing leases at the Saco and Portland CBOC locations, without disruption of care and services during the transition. The new 68,710 rentable square foot facility will enable VA Maine to expand services to Veterans in a state-of-the-art and energy efficient facility. The new clinic will offer core healthcare services as well as additional specialty care services to Veterans and will embody the VA’s Patient Aligned Care Team (PACT) principles.

FD Stonewater entered into a Joint Venture agreement with J.B. Brown & Sons, one of the oldest and largest commercial real estate owners in greater Portland, for development of the site. The project was awarded to the JV entity (FDS JBB Portland LLC) in the fall of 2019, with substantial project completion planned for fall 2021.

“We are honored to serve our nation’s Veterans,” said Ben Dineen, Principal at FD Stonewater. These facilities are essential to ensure our Veterans have improved access to the care they deserve. We are proud to work alongside the VA team and our project partners to develop this project, especially one that will have a meaningful impact on the city of Portland and surrounding communities.”

The July 17^th event attendees included representatives from VA Maine, including the Executive Steering Committee for the project as well as the current Saco and Portland VA Clinic managers.

SmithGroup will serve as the Architect of Record and Landry French Construction of Scarborough, ME, will serve as the General Contractor. Gorrill Palmer of South Portland will provide civil engineering services. NBT Bank is the lender for the project.

Photo Credit:Tim Greenway

By Norman Dong | Managing Director at FD Stonewater

As the nation continues to battle the COVID-19 pandemic, and with much of the country on lockdown, it may seem like we are living in unprecedented times. There are many open questions about the current public health situation, the outlook on the U.S. economy, and the capacity of the Federal Government to address these challenges. But there is some historical precedent for the magnitude of national crisis we are experiencing today. Our nation has experienced previous shocks to the system, which have been followed by a strong and sustained Federal response to these major events. It is important to understand how the Federal Government has responded to previous crises and the implications for government real estate.

As we try to make sense of our current situation, and as we consider the longer-term Federal impact, the events of September 11, 2001, come to mind. After the attacks, there was a significant expansion of Federal activity and spending to prevent future terrorist attacks at home and abroad. The establishment of the Department of Homeland Security in November 2002 was a direct response to the events of September 11. Moreover, other Federal agencies, including the Department of Defense and the Federal Bureau of Investigation, significantly expanded their functions to prevent future terrorist activity. Not surprisingly, funding for Federal homeland security activities at DHS and other agencies increased from $16 billion in FY2001 to almost $70 billion in FY2011 — an increase of more than 300 percent.

As the economy loses steam under the COVID-19 pandemic, we can expect to see large and sustained increases in Federal spending to promote economic growth.  During previous economic downturns, there were significant spikes in Federal spending as the government deployed a strong fiscal stimulus strategy to respond to the crisis and to jump start the economy.  This was true during the economic recession of the early 1980s, and it was true after the Financial Crisis of 2008-2009.  During the Great Recession of 2009, for example, Federal spending increased to a record 24.4 percent of Gross Domestic Product.  This increase was due in part to the American Reinvestment and Recovery Act of 2009 — the fiscal stimulus package that included $831 billion in new spending to provide temporary relief programs for those most affected by the recession and to invest in infrastructure, education, health, and renewable energy.

Change in Square Footage 2000-2019

As Federal spending increased in the aftermath of both September 11 and the Financial Crisis of 2008-2009, so did the Federal real estate footprint. The chart above shows trends in GSA leased inventory over the past two decades. The data shows a significant upward trajectory in the amount of Federally-leased space in the immediate years after the September 11 terrorist attacks as well as after the 2008 financial collapse, both in the National Capital Region and across the larger GSA portfolio.

Given past history, how can we expect the COVID-19 pandemic to impact Federal real estate? We can start by examining the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. The fiscal stimulus package enacted by the Congress last week reflects more than $2 trillion in government spending, with a $340 billion boost for Federal operations and response efforts to combat the COVID-19 pandemic. Increased agency spending includes spending to enhance the nation’s public health infrastructure, including $500 million for the Centers for Disease Control and Prevention to modernize public health data collection. Agencies including the Department of Agriculture, Interior, and Health and Human Services will receive funding to expand their workforce. And the General Services Administration will receive $275 million, which will fund deep cleaning and enhanced screening at Federal buildings and provide for emerging space requirements to support agency efforts to deal with the COVID-19 crisis. Depending on the severity of the current public health crisis and economic downturn, the CARES Act of 2020 may end up being the first in a series of steps taken by the Federal Government to get the economy moving again.

As we think about the short- and long-term impact on Federal real estate, there are several factors that should be considered, and these factors might have conflicting effects on Federal occupancy statistics:

• Historical precedent suggests that we might expect an expansion in the Federal real estate footprint as Federal activity ramps up to bolster the nation’s public health infrastructure and reinvigorate the economy.
• But in contrast to the previous events, the Federal response to the COVID-19 pandemic is taking place in era of significant downsizing of the Federal footprint. Our chart shows dramatic reductions in the Federal leasing footprint here in the National Capital Region since 2013, and a continuing trend of reductions in the overall GSA leased portfolio.
• As the vast majority of Federal employees telework every day during the pandemic, we are seeing a proof of concept unlike anything the Federal Government has experienced before. The CARES Act of 2020 will provide millions of dollars to agencies across government to improve their telework capacity through network expansions and software license purchases. As agencies demonstrate their ability to perform the functions of government by working remotely, will the Federal Government double-down on the concept of telework over the long-term?
• Finally, we must consider the concept of space densification. Over the past decade, agencies have dramatically improved their space utilization by eliminating private offices and embracing open-office environments that feature benching, hoteling, and telework. Will the COVID-19 pandemic and heightened concerns about infectious disease result in a push-back against the densification of workplaces and increase pressure to reconsider open office environments? Or, based on what is reflected in the Fiscal Stimulus package and in recent GSA policy guidance, will it only engender a new standard for janitorial services and cleaning of shared space?

As the Nation battles the COVID-19 pandemic, history has shown how the Federal Government and the nation have been able to overcome these monumental challenges. The current situation provides an opportunity to reflect on the Federal capacity to respond to the current crisis and our nation’s ability to recover from this event. These types of events compel us to examine not just the Federal program infrastructure, but also the Federal real estate posture, for dealing with these major shocks to the system. As the Federal real estate strategy continues to mature and evolve, it must do so in a way that supports our nation’s resilience.

Norman Dong is a Managing Director at FD Stonewater and is the Former Commissioner of the U.S. General Services Administration, Public Buildings Service.

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FD Stonewater has been recognized as a winner of the 2019 Greater Washington Area Best Places to Work, an awards program presented by the Washington Business Journal.

Select employers from the Greater Washington Area were named winners of the awards program and were honored during an event held on May 16, 2019. The winning organizations were recognized for their exceptional workplaces, comprehensive and creative benefits, and commitment to developing top talent.

Award applicants were evaluated and ranked across several categories according to the number of Greater Washington Area employees. The program measured several research-based workplace factors that impact employee engagement and satisfaction. The awards honored companies in the region that demonstrate excellence in areas such as workplace experience, benefits and perks, employee engagement, and management practices.

FD Stonewater was one of just 32 organizations that were honored in the small business category. Over 500 entries were received this year, a record number of submissions for the awards program.

For further information:

Kathryn Nuss

703-537-7628 Direct

[email protected]

FD Stonewater announced today that the company recently completed the disposition of a single-tenant property located on the grounds of the Grand Junction Regional Airport in Grand Junction, CO. The company acquired the property in a joint venture along with P&L Properties and Lynxs Group in April 2015 as part of the firm’s single-tenant strategy. The facility was fully leased at the time of acquisition on a long-term net basis.

The 30.6-acre site included a 229,744 square foot airport hangar facility housing an industry-leading aviation maintenance, repair, and overhaul (MRO) service provider. The seven-building facility is an FAA-authorized, Class 4 repair station, able to service all makes and models of large metal aircraft. Key investment attributes included the asset’s attractive, long-term lease and the tenant’s market-leading reputation.

FD Stonewater and their JV partners were initially attracted to the opportunity due to the long-term cash yields combined the tenant’s strong business prospects, along with the facility’s strategic location and mission critical functions.

During the hold period, the company renegotiated the tenant’s lease expiration date and renewal options to align with a restructured ground lease, which resulted in significant value to potential buyers. Multiple bids were received during the competitive process. The JV partners settled on a public REIT buyer who closed on an extremely aggressive timeline.

Andrew Schwartzman, a Principal at FD Stonewater, noted, “This was an extremely successful transaction for all parties involved. We’d like to thank our JV partners at P&L Properties and Lynxs Group who were instrumental throughout the deal. We knew going into this acquisition that it was a unique endeavor, but we were optimistic about the potential and confident that we had aligned ourselves with strong partners to implement and execute a robust business plan for the asset.”

For further information:
Kathryn Nuss
703-537-7628 Direct
[email protected]

FD Stonewater announced today it has completed the acquisition of Aramark’s Global Business Center, an 89,000-square foot office building in Nashville, TN. The building is 100% leased to Aramark, (NYSE: ARMK) a publicly-traded global food services, facilities management, and uniform services provider and full-building occupant since 2013. The acquisition was completed within FD Stonewater’s stabilized asset, secondary market investment strategy.

Located just south of Nashville in the Brentwood submarket, the property benefits from its strategic location, which provides easy access to the Nashville International Airport and to major interstates, along with proximity to a robust local employment base, strong business community, and vibrant public amenities. The building can support Aramark’s future growth and its above-market parking ratio allows for flexible, dense space-planning.

The Nashville office market has shown strong fundamentals in recent years and continues to attract active development and investment. The Aramark acquisition marks FD Stonewater’s fourth investment in Nashville, less than seven years after the firm’s first acquisition in the market.

FD Stonewater Principal Andrew Schwartzman commented, “We are thrilled to add this property to our portfolio and we continue to be strong believers in the Nashville office market. Since our first investment here in 2012, we have continued to evaluate opportunities in Nashville and surrounding submarkets that fit our investment strategies. We are confident that through thoughtful and active ownership, we will foster a long-term relationship with Aramark and provide support to the tenant’s objectives at the property.”

About FD Stonewater

FD Stonewater is a boutique real estate investment, development, and brokerage firm headquartered in Washington, DC. Collectively, the firm’s leadership has a track record of more than $10 billion, over 45 million square feet of lease transactions, and 21 build-to-suit projects completed, with $450 million of development currently in production.

For further information:
Kathryn Nuss
703-537-7628 Direct
[email protected]

Until Friday’s temporary fix for the partial federal government shutdown, the General Services Administration, the government’s in-house real estate services/design and construction/facilities management/bill payer was on the verge of freaking out.

I imagine some lessors were about to lose it, too.

The GSA pays the rent for government agencies, including the FBI, which leases its whole 110,000-square-foot Oklahoma City field office building at 3301 W Memorial Road, and Immigration & Customs Enforcement, which leases space in at least two private office buildings.

I imagine that until rent payments were threatened because of general contention and political animosity over the border (and how many walls are enough), there was no more reliable lessee in the world than the GSA acting for the USA, what with its full faith and credit on the
line every time the rent was due.

With the shutdown, January rent payments due in early February were in limbo.
Norman Dong, a managing director at FD Stonewater in Arlington, Virginia, and a former commissioner of the General Services Administration’s Public Buildings Service, brought some historic perspective in remarks earlier this week in a piece for the National
Federal Development Association, which he serves as a board member.

“In the past, there have been 20 instances of a Federal Government shutdown, with the first one taking place under the Ford Administration,” he wrote. “Never before has the Federal Government faced such a real and significant threat of delaying payments for its privately leased space.

“As we continue into these unchartered waters, it is helpful to see a potential solution for the Government to fund the next cycle of rental payments and avoid significant disruption and consequence, at least in the short-term.”

A “short term” fix apparently is what we got Friday.

Not lost on some people, whether regular federal funding returns or not, is that the standoff over the wall was a threat not only to lots of everyday people, but two of the agencies charged with protecting them, including border protection: the FBI and ICE.

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By Norman Dong

Managing Director at FD Stonewater, NFDA Board Member

At Day 33 of the Federal Shutdown, which is now the longest shutdown in U.S. history, owners and investors of property leased to the Federal Government continue to wonder whether the Government will be able to pay its January rent payments that are due in early February. This concern is not lost on GSA, as reflected in a recent statement posted on its website: “GSA also is aware of concerns from the Lessor community regarding GSA’s ability to make timely rent payments. GSA is diligently exploring all available options to ensure its rental obligations are met in a timely manner.”

It is unclear, however, how the Agency will address this pressing issue. As noted in our previous article, the question is not whether the Government will pay its full rent obligations, but when it will make these payments. What remains at risk is the timing of nearly half a billion dollars in rental payments due in early February, affecting more than 8,000 leases in the GSA portfolio. GSA leases typically do not contain any provision allowing the Government to delay rent payments, and the reliable receipt of those payments is an important factor to the value of GSA leases in the market. Missing or delaying a scheduled rent payment potentially could put numerous GSA lease-secured commercial mortgages into default and eventually increase GSA’s cost to acquire leased properties. Moreover, this type of payment disruption could result in a downgrade of the U.S. Government’s credit rating.

While the consequences of a delay in payments would be significant, there is a potential path forward for the Federal Government to make the next cycle of rental payments. It is important to understand the mechanics of the GSA budget to see the potential near-term resolution.

GSA makes payments to private landlords through its Federal Buildings Fund Rental of Space Account. In its FY2019 Budget, the Agency requested about $5.6B, which translates into a monthly rental obligation of approximately $470M for the space it occupies in privately-leased facilities. Because the GSA Public Buildings Service receives funding that can be carried forward from one year to the next, the Agency was able to use “carry-over” funds from last year to meet its December rent obligation. However, the current balance of GSA’s Rental of Space Account is insufficient for the Government to fund the next cycle of rental payments.

Although the Rental of Space Account may be dwindling, there are other funds in GSA’s coffers that potentially could be brought to bear on this issue. A review of the FY2018 Agency Financial Report for GSA shows almost $4.9B in unspent funding from prior years across the various accounts within the Federal Buildings Fund, funds that GSA can carry-forward and use in the current fiscal year. A significant portion of these unspent funds reflects money that Congress has appropriated, but the Agency has not yet spent, for new construction, acquisition, and repairs and alterations to Federally-owned buildings. For now, these funds are sitting idle, waiting to be spent as the Agency moves forward to execute these capital projects. During this current 1 2 shutdown period, the probability is extremely low that the Government will spend this money as these activities are largely prohibited under GSA’s current shutdown guidelines.

Technically speaking, GSA has the money in its various accounts in the Federal Buildings Fund to make its next cycle of rental payments. One potential solution would be for the Government to transfer these unspent capital funds on a temporary basis to the Rental of Space account to fund the next cycle of rental payments. When the Government is funded and open for business once again, GSA could replenish these capital accounts. GSA has statutory authority to move funding among its various accounts, but not without prior approval from the House and Senate Appropriations Committees. While this may seem like a tall order in today’s environment, approval of this type of funding transfer at the committee level would be far less complex than enacting the full-year appropriations bills that are currently at the center of the Shutdown debate, and which must be passed by the full House and Senate and signed by the President.

In the past, there have been 20 instances of a Federal Government shutdown, with the first one taking place under the Ford Administration. Never before has the Federal Government faced such a real and significant threat of delaying payments for its privately-leased space. As we continue into these unchartered waters, it is helpful to see a potential solution for the Government to fund the next cycle of rental payments and avoid significant disruption and consequence, at least in the short-term.

Norman Dong is a Managing Director at FD Stonewater and is the Former Commissioner of the U.S. General Services Administration, Public Buildings Service

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By Norman Dong

Managing Director at FD Stonewater,

NFDA Board Member

Annual funding for a significant part of the Federal Government, including GSA, expired on December 21, 2018, resulting in the current government shutdown. Because the GSA Public Building Service receives funding that can be carried over from one year to the next, GSA was able to utilize carryover funds to continue its real estate functions beyond December 21 and support ongoing operations, including salaries and expenses, on a temporary basis. As the balance of carryover funding has declined in recent weeks, the Agency has furloughed employees beginning Monday, January 7, 2019.

GSA Order ADM 4220.1L: Operations in the Absence of Appropriations, issued on September 24, 2018, identifies a limited number of “excepted” activities within GSA Public Buildings that may continue in the absence of appropriation. These activities are “to protect Federal property under GSA’s custody and control and to continue to provide critical support to other Federal agencies’ exempt and excepted activities for the protection of life and Federal property.” Under the shutdown, GSA leased buildings will remain open to allow tenant agencies to perform vital services and perform essential missions. Although the reduced number of employees reporting to work might suggest an ability to scale back on some services, leases typically do not contain specific shutdown provisions and lessors are required to continue to meet the requirements of the lease.

There are other important items to note regarding GSA Leasing during the shutdown:

• The lapse in appropriations will not reduce the total amount of the Government’s lease obligations. If a contract was fully obligated (as is the case with most GSA leases) before the lapse in appropriations, the contract is in full force and effect and no additional actions are required.

• Although there has never been an instance of it occurring, the length of the shutdown could hypothetically impact the timing of lease payments. GSA makes rental payments in arrears several days after the end of the month. If GSA does not have sufficient budget authority in its Rental of Space Account when January rental payments are due in early February, and no other provision has been made, then payments could be delayed. During the 2013 shutdown, which began on October 1 and lasted for 16 days, the government had re-opened early enough in the payment cycle for there to be no disruption or delay in the timing of payments.

• Brokers working under the GSA National Broker Contracts will continue to work because their function is not funded through annual appropriations but through commissions paid by private sector landlords. But to the extent that the brokers are working with GSA staff who have been furloughed, there may be an impact on on-going lease procurements.

• Unless notified by the Government or a representative, lessors and offerors are still required to meet submission deadlines and other delivery milestones of contracts and procurements. However, in most instances, new contracts may not be awarded, and contract options increasing the Government’s financial obligation may not be exercised except in rare circumstances.

• The shutdown impact on post-award activity (work in progress for new build-outs, tenant improvement projects, build-to-suit projects, etc.) will vary by project based on whether specific projects have been deemed as excepted, whether the work has already been funded, and/or the extent to which staff at GSA and tenant agencies have not been furloughed.

Most of the uncertainty surrounding this shutdown’s effect on GSA’s leased portfolio revolves around how long GSA goes without funding. While a shutdown ending in the next few days would have a relatively minor impact on Federal leasing, a shutdown that persists into February would require the Government to take unprecedented steps to fund its ongoing rent obligations to avoid significant disruption and consequence.

Norman Dong is a Managing Director at FD Stonewater and is the Former Commissioner of the U.S. General Services Administration, Public Buildings Service.

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Arlington, VA – November 20, 2018 – FD Stonewater announced today that the firm will once again represent ownership, this time as a development manager, for the redevelopment of the U.S. Drug Enforcement Administration (DEA) Headquarters complex at Lincoln Place. The DEA recently committed to a 15-year follow on lease at the two-building complex, a highly secure facility situated in Arlington County’s Pentagon City neighborhood. DEA remains the sole occupant of Lincoln Place. FD Stonewater represented ownership on the 15-year lease renewal for Lincoln Place in what is expected to be the largest lease transaction in Northern Virginia this year.

The redevelopment of Lincoln Place will be comprehensive and is expected to be valued between $80-$100 million dollars. The work will enable DEA to materially modernize their law enforcement mission and to implement efficiencies that will allow an additional 400 staff to work at the headquarters complex. Ownership has committed to concurrent capital upgrades, with the project goal of maintaining Lincoln Place as a best-in-class federally-leased facility.

The DEA redevelopment assignment also marks continued expansion of FD Stonewater’s federal development and construction management platform. FD Stonewater is currently managing several large-scale federal projects on behalf of building owners, including the 118,000 square foot interior renovation for the Federal Emergency Management Agency (FEMA) in Atlanta, and the 500,000 square foot redevelopment and restack for the National Institutes of Health (NIH) in Bethesda, MD.

Ben Dineen, Vice President at FD Stonewater, commented, “Our development team is focused on delivering the highest quality service to this assignment, bringing our ownership mentality while also leveraging our specialized government experience and technical capabilities to meet the DEA’s unique requirements. The redevelopment of this complex will significantly improve the properties and will meet the tenant’s modern occupancy standards as the agency upgrades and expands their mission over the next several years.”

Claiborne Williams, Principal at FD Stonewater, added, “This redevelopment assignment fully aligns with our core development platform as FD Stonewater has a rich history of providing services to owners with federal government occupants. We are comfortable navigating the complexities of this high-profile project and we are confident operating within the unique federal real property space. Most importantly, we are extremely proud to be a part of this project that will improve the DEA’s efficiency in carrying out their mission, while also maintaining this value-critical occupancy for ownership and positively impacting the country at large.”

FD Stonewater is working with SmithGroup as the lead architect for the project.

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.

Arlington, VA – September 24, 2018 – FD Stonewater announced today that it successfully represented building ownership in securing a long-term lease renewal with the General Services Administration (GSA) for 511,000 square feet, in what is the largest Northern Virginia federal leasing deal this year. The transaction was completed for a two-building complex, known as Lincoln Place; a highly secure facility situated in Arlington County’s Pentagon City neighborhood. Lincoln Place is fully occupied by the U.S. Drug Enforcement Administration (DEA) and serves as the DEA’s national headquarters.

FD Stonewater negotiated the 15-year lease renewal in a highly-competitive procurement and will now represent the owner, as construction manager, during a comprehensive, multi-phase building redevelopment and renovation program slated to complete in 2020. FD Stonewater represented ownership in all aspects of negotiating the new lease at Lincoln Place and concurrently is negotiating the swing space requirement for the renovation.

Chad Habeeb, Vice President at FD Stonewater, commented, “With TSA’s forthcoming departure from Pentagon City, there was a lot of pressure on the County to keep the DEA in Arlington and getting the County involved was imperative to the success of this deal. We are optimistic that this renewal will materially impact the county’s economic vitality, as nearly 3,000 jobs will remain in the county and the redevelopment of the site and mission expansion of the agency will likely spur additional jobs and growth.”

Joe Delogu, Principal at FD Stonewater, added, “We are thrilled to have secured the DEA’s tenancy in Arlington County for the next 15 years. The redevelopment of this complex will greatly improve the properties and will meet the tenant’s modern occupancy standards. We are extremely proud to be a part of this transaction that will improve the DEA’s efficiency in carrying out their mission, while also maintaining this value-critical occupancy for ownership and positively impacting the county at large.”

FD Stonewater worked closely with Joel Berelson and Gregg Otten of the GSA, as well as the GSA’s tenant brokers, Henry Chapman and Sara Dunstan of CBRE. This highly competitive, prospectus-level deal is nearly four years in the making and required a strategic, creative approach to successfully meet ownership and tenant objectives.

About FD Stonewater

FD Stonewater is a boutique real estate investment, development, brokerage and advisory firm headquartered in Washington, DC. Collectively, the firm’s leadership has a track record of more than $10 billion, over 45 million square feet of lease transactions, and 18 build-to-suit projects completed, with $240 million of federal development currently under construction.

For further information:
Kathryn Nuss
703-537-7628 direct
[email protected]

Arlington, VA – July 23, 2018: FD Stonewater announced that it has recently been awarded two new development deals, both for specialized healthcare facilities housing federal tenants. The new projects represent the most recent successes for the firm’s expanding federal development and construction management platform. The first award was for a 15-year lease by the General Services Administration (GSA) to house the United States Air Force in Brandon, FL. FD Stonewater acquired the building and is redeveloping the 44,000 square foot asset, transforming it from its prior call center and general office use into the new MacDill Satellite Clinic, a state-of-the-art medical facility that will provide comprehensive medical care to members of the Air Force and their families.

The second development is a 20-year lease for the United States Department of Veterans Affairs in Charlotte Hall, MD. This ground-up development is situated on a 6.9-acre site and will consist of approximately 25,000 square foot Community Based Outpatient Clinic that will provide Veterans with accessible, comprehensive, and patient-centered healthcare. Claiborne Williams, Principal at FD Stonewater, commented, “We are thrilled to have been selected to lead these two important projects. Our expertise in government-occupied real estate, along with the proven track record of our project partners in delivering specialized healthcare facilities across the country, will guide critical decisions at key project milestones and ultimately result in the best possible outcome for the tenants. We are truly honored to support these vital organizations and deliver new facilities that will serve the men, women, and families of our Armed Forces, as well as our country’s Veterans, for the next 20 years and beyond.”

FD Stonewater is a leader in designing, developing and owning facilities leased and occupied by government tenants. The firm and its affiliates has successfully delivered 18 build-to-suit lease projects on behalf of government tenants. The company has over $240 million of federal development projects underway nationwide.

Oculus Inc. serves as the project architect with Harvey Cleary Builders serving as general contractor for both projects.

About FD Stonewater

FD Stonewater is a boutique real estate investment, development, and brokerage firm headquartered in Washington, DC. Collectively, the firm’s leadership has a track record of more than $10 billion, over 45 million square feet of lease transactions, and 18 build-to-suit projects completed, with $240 million of federal development currently under construction.

For further information:
Kathryn Nuss
703-537-7628 Direct
[email protected]

Arlington-based real estate firm FD Stonewater has long been known for leasing government-occupied properties in the Washington area and purchasing office portfolios that offer potential for significant reinvestment.

But over the past two years, the company has turned its attention to buying office buildings it considers “stabilized” — think properties with high-profile tenants under long-term leases that generate steady rents.

“Over the last couple of years, we have been looking at more stable cash flow investments,” said Andrew Schwartzman, a principal with FD Stonewater. “That’s the addition of a new strategy for us, whereas 10 years ago we weren’t looking at stable, multitenant investment deals.”

The latest example of that strategy is FD Stonewater’s recent purchase of SunTrust Center I and II, a 420,000-square-foot Class A suburban office campus in Richmond, Virginia. That deal, announced Wednesday, was made with an undisclosed foreign investor formed to acquire real estate assets in the United States. Terms were not undisclosed.

SunTrust Center I and II are considered stable, due largely to SunTrust Bank’s Mid-Atlantic regional headquarters, the anchor tenant there, Schwartzman said. The bank occupies all of SunTrust Center I and 40 percent of SunTrust Center II. The property is currently undergoing a $30 million renovation that will include a new lobby, fitness center and cafe. That renovation was underway before FD Stonewater bought the property from Atlanta-based Bridge Commercial Real Estate.

“That’s a longer-term stabilized type of deal, where we are buying based on the strength of the cash flow,” Schwartzman said. “Today, everybody seems to want to buy value-add deals. There’s probably less capital today chasing stable deals in secondary markets. … We are always looking for returns relative to the risk.”

Schwartzman declined to provide specific markets, but said the company will continue to purchase stabilized properties in areas of the country such as the Midwest, Southeast and Southwest. Last year, it bought River Park 1, a 170,000-square-foot office property in Conshohocken, Pennsylvania, that is 100 percent occupied by Reimbursement Technologies, Inc.

That’s not to say the firm has given up on what got it here. It has a team that handles federal leasing for several thirdparty clients as well as build-to-suit projects, such as a recently completed Citizenship and Immigration Services facility in Nashville.

It will also continue to acquire properties that are in need of significant reinvestment, such The Timberland Buildings office portfolio in Troy, Michigan. That property, which FD Stonewater also announced Wednesday it had purchased, is about 50 percent leased to a variety of tenants including law and engineering firms.

FD Stonewater has hired Transwestern to provide property management and leasing services for the Michigan property. FD Stonewater will invest $12 million to renovate and reposition those buildings over two years, Schwartzman said.

“We’re redesigning the buildings from a physical aesthetic perspective,” Schwartzman said. “We’ll be doing leasing. We’ll be improving the buildings’ systems and providing a lot of the capital that has not been available to these buildings for the last several years. … We bought it for what we think was a reasonable price, and we’re investing a lot more money in those buildings to reposition them and create a lot of value.”

FD Stonewater recently raised money for both of the deals. According to SEC filings, the company raised $2.4 million toward the Timberlands deal and $1.25 million for the SunTrust Center transaction.

View full article here.

Arlington, VA – May 24, 2018 – FD Stonewater announced today it has completed the acquisition of SunTrust Center I & II, a 420,000-square foot, Class A suburban office campus located in Richmond, VA. The buildings are 100% leased and benefit from the successes of the Innsbrook office submarket and the nearby Short Pump retail corridor. The acquisition was completed within FD Stonewater’s stabilized asset, secondary market investment strategy.

The property’s anchor tenant, SunTrust Bank, utilizes the space for its Mid-Atlantic regional headquarters. These buildings were selected over newer, build-to-suit office product, largely due to the branding opportunity, central location, existing building infrastructure, and abundant amenities. In an effort to elevate the property as a flagship location for the SunTrust brand, the property is undergoing a significant renovation, with more than $30 million being invested to transform the asset into a vibrant and collaborative workspace with core building upgrades and a new lobby, fitness center, and café.

SunTrust Center is the second investment in FD Stonewater’s partnership with a foreign, multifamily office investor formed to acquire real estate assets in the U.S.

Owen Burke, Director of Asset Management for the firm, commented, “The business strategy is to operate the property in an institutional manner and develop long-standing relationships with the tenants. This is the second acquisition for the firm in the past week as we have seen our portfolio continue to grow through various investment and development strategies. The portfolio currently has 14 active projects and we will continue to selectively sell or recapitalize assets as business plans are completed.”

FD Stonewater Principal Andrew Schwartzman added, “We are thrilled to continue our relationship with our investment partner through this acquisition of SunTrust Center. The property is located in a highly amenitized Richmond office submarket that has historically seen resilience and strong occupancy trends. We are confident that through thoughtful ownership and a strategic approach to the property, we can accentuate the property’s successful history of leasing space to large corporate users while highlighting the property’s competitive advantages in this market.”

About FD Stonewater

FD Stonewater is a boutique real estate investment, development, brokerage and advisory firm headquartered in Washington, DC. Collectively, the firm’s leadership has a track record of more than $10 billion, over 45 million square feet of lease transactions, and 18 build-to-suit projects completed, with $240 million of federal development currently under construction.

For further information:
Kathryn Nuss
703-537-7628 direct
[email protected]

Norman Dong, managing director at FD Stonewater, discusses evolving trends and potential practices in federal government real estate with Government Matters host Francis Rose

Click here to watch the video

Arlington, VA – September 26, 2017 – FD Stonewater announced today it has recently completed construction of an 151,066-square foot build-to-suit facility which is under a long-term lease to the U.S. General Services Administration (GSA) for use by the Federal Bureau of Investigation (FBI). The lease contract total value is $101M. The project was completed on time and on budget and is situated on 13 acres of land ground-leased from Mercer University.

This state-of-the-art facility will serve as the FBI’s Atlanta field office and supports the FBI’s mission while ensuring seamless collaboration and integration with state and local law enforcement.

FD Stonewater announced today it has recently completed construction of an 151,066-square foot build-to-suit facility which is under a long-term lease to the U.S. General Services Administration (GSA) for use by the Federal Bureau of Investigation (FBI). The lease contract total value is $101M. The project was completed on time and on budget and is situated on 13 acres of land ground-leased from Mercer University.

This state-of-the-art facility will serve as the FBI’s Atlanta field office and supports the FBI’s mission while ensuring seamless collaboration and integration with state and local law enforcement.

A San Francisco real estate investor has paid $80 million for a State Street office building, betting it can find new tenants to fill a large vacancy. Shorenstein Properties today said it has acquired the 533,000-square-foot office portion of 1 N. State St., connected towers of 11 and 16 stories. The statement did not name a sale price, which someone familiar with the deal said is almost $80 million.

The sale does not include retail space on the bottom two floors of the building, which are owned separately.

The seller is Arlington, Va.-based FD Stonewater, which bought the property for $31.7 million in 2007, before the recession, according to Cook County property records.

The building’s office space is 45 percent vacancy, according to Shorenstein’s statement.

At more than double the previous owner’s purchase price, Shorenstein is demonstrating confidence in a downtown leasing market where vacancy fell to a 15-year low during the second quarter.

Shorenstein knows Chicago well, having previously owned iconic office properties including the John Hancock Center and Prudential Plaza. Last year, Shorenstein sold the former Apparel Center, now known as River North Point, to Blackstone Group for $378 million.

Jeffrey Toporek, an FD Stonewater principal, did not immediately return calls requesting comment on the sale.

The State Street building was constructed in phases between 1900 and 1912, according to the Shorenstein statement.

FD Stonewater spent more than $10 million over the past two years upgrading the building with a new roof deck, bike room and lobby renovation. Shorenstein plans additional upgrades and new amenities, according to the statement.

The largest tenants are the Noble Network of Charter Schools, the e-commerce office of Sears and co-working firm MakeOffices, all with more than 50,000 square feet.

Ori, Ryan. “State Street Office Property Sells for $80 Million.” Crain’s Chicago Business. Crain’s Chicago Business, 30 Aug. 2016. Web. 06 Dec. 2016.

FD Stonewater announced today that effective July 17, 2017, Norman Dong, the former Commissioner for the United States General Services Administration, Public Buildings Service, will be joining the firm as Managing Director. Mr. Dong will assume a leading role within the firm’s Federal Government real estate third-party advisory and principal development platforms. Mr. Dong has a distinguished history working in both the private sector and as a Government executive. During his tenure as Commissioner for the GSA’s Public Buildings Service, Mr. Dong led the asset management, design, construction, leasing, building management, and disposal of nearly 374 million square feet of government-owned and leased space across all 50 states, six U.S. territories, and the District of Columbia.

“I’m delighted to join FD Stonewater, as this is a unique opportunity to leverage my experiences to achieve positive outcomes for Federal Government real estate from a different perspective,” said Dong. “I am impressed with the caliber of FD Stonewater’s team and the national resume of work that this firm carries. It’s rare to see a firm with their depth and breadth of experience, and they have maintained a nimble and entrepreneurial business model that undoubtedly serves both their private-sector clients and the public sector well. I hope to build on this success as the firm continues to grow.”

A graduate of Yale University and Harvard’s John F. Kennedy School of Government, Mr. Dong has spent the last decade of his 30-year career serving the Federal Government in executive, management, and advisory capacities; including previously held positions as Deputy Controller of OMB, CFO of DHS/FEMA and Deputy Mayor for Washington, DC. Mr. Dong’s notable accomplishments as Commissioner for the GSA’s Public Building Service include reducing the Federal real estate footprint, which resulted in annual savings of more than $100 million, as well as overseeing a multi-billion-dollar capital program to support new construction and major renovation of various GSA properties. In addition, Mr. Dong developed the portfolio strategy to identify productive use for underutilized GSA properties, which will yield more than $1 billion in value to the Federal Government while supporting local urban development objectives.

FD Stonewater Principal Richard Mann said, “Norm is a tremendous addition to the team and we expect him to make an immediate impact on the business; particularly with our clients who own Federal Government leased real estate across the country. His notable background, insight, and expertise in Federal Government real estate matters are well-suited for the firm’s strengths and enhances our strategic advisory practice and development platforms in this arena.” Principal Joseph Delogu further commented, “We are pleased to welcome Norm to the firm and we are confident he will bring a fresh and very current perspective to our business. His experience and wealth of knowledge is extremely valuable, particularly in today’s highly competitive marketplace when crafting sound strategy is more important that ever. We are confident that Norman will be integral in solidifying our firm’s status as the preeminent expert for Federal Government leasing, development, and advisory services.”

Arlington, VA – Tim Lenahan has joined FD Stonewater as a Managing Director of Government Leasing. At FD Stonewater, Tim will bring his 13 years of experience in the government real estate sector to advising the firm’s 3rd party landlord clients on transacting business with government entities and will also support the company’s own principal development efforts in the government arena. Prior to joining FD Stonewater, Tim was a First Vice President of CBRE’s Federal Lease Advisory Group.

David Alperstein, a principal at FD Stonewater, commented “we’re very excited to have Tim join our government leasing and advisory team, which has long been one of our firm’s most valued franchises. Adding Tim to the team is just another step in maintaining our best-in-class offering to our clients and their investors.” FD Stonewater principal Joe Delogu added, “Tim’s tremendous experience is an outstanding addition to FD Stonewater. His entrepreneurial and creative approach to our business is an excellent complement to the platform and will offer expanded expertise to our clients.”

Tim reflected, “After 13 very productive years at CBRE, it was simply time for me to expand my horizons and FD Stonewater is truly the only other team that offers its clients the level of strategic guidance that I find critical to achieving successful transactional outcomes. The unique vertically-integrated, yet-boutique and entrepreneurial platform allows for FD Stonewater to execute better than anyone else in the sector.”

Tim can be reached directly at [email protected] or (703) 537-7625.

Arlington, VA – FD Stonewater announced today it has completed the acquisition of a Class A, 164,845-square foot multi-tenant office building located at 1007 Church Street in downtown Evanston, Illinois. The iconic building was designed by world-class architect Helmut Jahn and is located less than one block from the Davis Street Station (Metra and CTA) and approximately 13 miles from Chicago’s CBD. The property – 79% leased upon acquisition – is home to several national and international tenants in the education, healthcare, and technology sectors. The acquisition was procured under FD Stonewater’s secondary market, multi-tenant, value-add investment strategy.

The building has been renamed “Evanston MetroCenter,” and ownership is planning to enhance the tenant experience through physical building improvements, expanded tenant services and cosmetic upgrades. The acquisition also includes onsite expansion potential that is currently being evaluated by FD Stonewater’s development team for multiple possible uses.

FD Stonewater Principal Jeff Toporek commented, “we are thrilled to acquire Evanston MetroCenter, particularly on the heels of recently selling One North State Street in the Loop this summer. We have enjoyed success in Chicago and are excited to add such a high-quality, transit-oriented asset to our portfolio. The asset’s superior location is well-suited to meet the discerning needs of tenants desiring an amenity-rich, urban environment outside of downtown Chicago but only an 18-minute train ride away.”

Andrew Schwartzman, Principal and Head of Acquisitions for the firm added, “Evanston MetroCenter is one of only a few office buildings in all of Chicagoland’s suburbs that offers superior access to mass transit, dozens of walkable amenities, and abundant parking in such a vibrant environment. We plan to restore the property’s stature as a true Class A office building in Evanston with one of the most unique amenity bases in the market.”

About FD Stonewater

FD Stonewater is a boutique real estate investment, development, asset management, brokerage and advisory firm based in Arlington, Virginia, with an office in Los Angeles. The company has a track record exceeding $10 billion in investment, advisory, and development as well as over 40 million square feet of lease transactions.

Arlington, VA – FD Stonewater announced that it has been awarded the exclusive rights to negotiate a 30-year lease contract with the State of Maine Bureau of General Services (BGS) for the purchase and redevelopment of the Maine DOT 109 Capitol Street in Augusta, ME. The parcel consists of 9.2± acres with eight connecting buildings and other out-buildings situated two blocks from the State Capitol. The existing structures on site would be demolished to make way for an approximate 89,000-square foot facility for the Department of Health & Human Services. Construction is estimated to commence in mid-2017. The design team is comprised of HGA Architects based in Alexandria, VA and Maine-based Mark Mueller Architects. The general contractor is Landry/French.

FD Stonewater principal, Claiborne Williams, commented, “We are thrilled to have been chosen to be the State of Maine’s development partner on this important assignment which, while delivering a high-quality build-to-suit for a State agency, will also revitalize a large land parcel in the heart of Augusta. Our national expertise in government-occupied real estate, along with the proven track records of our team partners in delivering projects across the State of Maine, are tailor-made for this endeavor. We are truly excited about the opportunity to deliver a new facility which will meet the State’s mission for the next thirty years and beyond.”

FD Stonewater is a leader in designing, developing and owning facilities leased and occupied by government tenants. This will be the 18th such build-to-suit lease project that the firm and its affiliates have successfully delivered on behalf of government tenants. The company has over $200 million of projects underway nationwide, consisting of government build-to-suits, corporate build-to-suits and other commercial projects.

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.

Arlington, VA – FD Stonewater announced today that effective January 1, 2016 William Magner joined the firm’s Board of Advisors and will be actively involved in the organization’s continued expansion. In particular, Bill will assist with growing the investor base within the firm’s nationwide principal investment and development platforms. Mr. Magner has a distinguished history in the commercial real estate industry having most recently served as the U.S. President for Cushman & Wakefield. Prior to Cushman & Wakefield, Bill was an International Director for Jones Lang Lasalle (JLL) and Spaulding & Slye, where he served as a Managing Partner of the DC Region prior to JLL’s acquisition of the firm.

FD Stonewater Principal David Alperstein said, “Bill is a long-time friend of the firm and has been a valued partner and mentor to many of us throughout our careers. Adding Bill as an active member of our Board is a tremendous opportunity for us to tap into his broad knowledge base, trusted relationships and strategic thinking as we plot our future path.” Principal Joseph Delogu further commented, “Some of us have known Bill for 20 years and he is one of the most thoughtful and respected professionals in our industry. His experience in managing both boutique firms and large national enterprises, will provide FD Stonewater with insights unique for our growing, entrepreneurial and fully-integrated national platform.”

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.

Arlington, VA – FD Stonewater announced today the sale of a four-building portfolio, each fully leased by the Federal Government. The portfolio consists of two Customs and Border Patrol (CBP) facilities located in Jacksonville and Riviera Beach, Florida; a U.S. Military Entrance Processing Command (MEPS) facility in Nashville, Tennessee; and an Immigration and Customs Enforcement (ICE) facility in Cary, NC. The portfolio was purchased by Boyd Watterson.

FD Stonewater, attracted by the staggered lease roll over and geographic diversity, originally purchased three of the buildings in 2012 as the first acquisitions for the FD Stonewater/Roseview Fund. During its tenure as owner of the portfolio, FD Stonewater executed lease renewals in two of the buildings and was awarded a long-term lease extension and substantial expansion at the ICE facility in North Carolina.

Jeff Toporek, a Principal at FD Stonewater, commented, “This sale represents a successful execution of our opportunistic Federal acquisition and development program, having purchased existing assets with shorter terms remaining and developed new longer term assets. The properties are mission critical facilities with well-funded government agencies, representing business plans we have been pursuing over the past few years, and it’s great to see the strategy fully realized.” Principal Joe Delogu further commented, “We are pleased to have invested on behalf of a Fortune 100 corporate pension fund and delivered a successful outcome for the strategy from inception to completion. The fund truly employed each of the disciplines fully integrated into our platform including investment, asset management, development and federal leasing – resulting in returns outperforming the original underwriting.”

Arlington, VA – FD Stonewater announced today it has completed the acquisition of a single-tenant property located in Cantera, a 650-acre mixed-use commercial development in Warrenville, IL. The Class A building consists of 136,000 square feet of office space on 19 acres of land with an above-market parking ratio. The building is fully leased to a subsidiary of a top Global Fortune 500 company and is replete with a high-tech creative office build-out.

FD Stonewater has a long track record of successful investment and advisory strategies in Chicagoland. Nationally, the company has completed over $467 million of property acquisitions and development. Regarding the Cantera transaction, David Stade, a Principal at FD Stonewater, commented, “Within four years, as the current lease expiration approaches, we expect to reposition the property for sale to an owner/user or lease to a tenant who wishes to take advantage of the state-of-the-art facility, a parking ratio of more than 5/1,000 square feet, and excellent freeway visibility.”

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.

Arlington, VA – FD Stonewater and Lynxs Group announced today they had completed the acquisition of a single-tenant property located in Grand Junction, Colorado. The multi-purpose industrial hangar and office facility is located within the airport grounds of the Grand Junction Regional Airport, and is fully leased to a single-tenant with a long-term lease. The transaction exemplifies FD Stonewater’s strategy of acquiring single-tenant, mission-critical facilities nationwide. The company has acquired in excess of $200 million of these types of assets encompassing more than 3.0 million square feet.

The facilities were acquired in a joint venture with Lynxs Group, a developer specializing in airport facilities worldwide; the seller, P&L Properties, also remains a partner in the new ownership structure. David Stade, a Principal at FD Stonewater, commented, “Complicated deals with ground leases and multiple parties at the table such as this one can be more challenging to transact, but we tend to specialize in them and have built a solid track record doing it.” Andrew Schwartzman, FD Stonewater’s newest partner, added, “We’re excited by the opportunity to work with our new partners to continue to build value at the Grand Junction Airport in an enterprise that will continue well into the future.” Ray Brimble, Founder of Lynxs Group, said, “The location is outstanding with a world-class business aircraft maintenance and refurbishment service in the facility. We are pleased to be associated with this site.”

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.

Arlington, VA – FD Stonewater announced today it has closed on the acquisition of a single-tenant property located in Nashville, TN. The transaction exemplifies one of FD Stonewater’s platform strategies; namely, acquiring single-tenant, mission-critical facilities nationwide. The company has acquired and developed in excess of $275 million of these types of assets encompassing more than 2.8 million square feet.

The 123,000-square foot building is located in the Airport South submarket of Nashville and is 100% leased to Asurion, a leading technology company headquartered in Nashville. Asurion provides mobile protection, electronics warranty protection and customer support services globally.

Andrew Schwartzman, FD Stonewater Principal of Acquisitions commented, “We are truly excited to add to our portfolio in the Nashville market. The asset basis, tenant quality, high parking ratio and improving location were strong drivers in our decision to acquire the property.” Jeff Toporek, a Principal at FD Stonewater, further commented, “2014 was a busy year for us acquiring 300,000 square feet of single tenant assets and expanding our other investment and development strategies nationally. We look forward to growing that significantly in 2015 and are on target to close on multiple investments in the first quarter.”

About FD Stonewater

FD Stonewater is a boutique real estate development, investment, advisory and brokerage firm based in Arlington, Va., with an office in Los Angeles. The company has a track record of more than $10 billion in investment, advisory, and development deals and has completed over 40 million square feet of lease transactions.