The Kensington Business Centr Tulsa, Oklahoma
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The Kensington Business Centre Tulsa, Oklahoma Project Type: Mixed-Use/Multi-Use Case No: C027014 Year: 1997 SUMMARY An 814,000-square-foot mixed-use development in suburban Tulsa. The business center represents the conversion of a former upscale retail mall, completed in 1984, to office use. A single, large, high-technology tenant occupies what used to be the entire mall except the space formerly occupied by Dillard's department store, the sole retail anchor for the former mall. Two other office tenants (one a bank and the other a high-tech firm) occupy what used to be the department store. A 407-room former Sheraton hotel is now the Marriott Southern Hills, a totally refurbished, full-service business hotel with 382 rooms and 43,000 square feet of meeting space. In addition to cosmetic changes, the hotel rooms have been reconfigured and wired to accommodate voice and data transmissions via modems, facsimile machines, and the Internet. The 183,000-square-foot office tower and 51,000-square-foot linear shopping center have remained largely unchanged since their openings 13 and 20 years ago, respectively. Phase II, for which plans are underway, is expected to add another 228,000 square feet, for a total of 1,042,000 square feet. FEATURES Former retail mall Adaptive use of retail to office space Suburban mixed-use development Full-service business hotel All-cash deal; no financing involved State-of-the-art telecommunications and computerized management systems Retail annex to serve Kensington Business Centre The Kensington Business Centre Tulsa, Oklahoma Project Type: Mixed-Use Volume 27 Number 14 July-September 1997 Case Number: C027014 PROJECT TYPE An 814,000-square-foot mixed-use development in suburban Tulsa. The business center represents the conversion of a former upscale retail mall, completed in 1984, to office use. A single, large, high-technology tenant occupies what used to be the entire mall except the space formerly occupied by Dillard's department store, the sole retail anchor for the former mall. Two other office tenants (one a bank and the other a high-tech firm) occupy what used to be the department store. A 407-room former Sheraton hotel is now the Marriott Southern Hills, a totally refurbished, full-service business hotel with 382 rooms and 43,000 square feet of meeting space. In addition to cosmetic changes, the hotel rooms have been reconfigured and wired to accommodate voice and data transmissions via modems, facsimile machines, and the Internet. The 183,000-square-foot office tower and 51,000-square-foot linear shopping center have remained largely unchanged since their openings 13 and 20 years ago, respectively. Phase II, for which plans are underway, is expected to add another 228,000 square feet, for a total of 1,042,000 square feet. SPECIAL FEATURES Former retail mall Adaptive use of retail to office space Suburban mixed-use development Full-service business hotel All-cash deal; no financing involved State-of-the-art telecommunications and computerized management systems Retail annex to serve Kensington Business Centre DEVELOPER Phil G. Ruffin Ruffin Companies P. O. Box 17087 Wichita, Kansas 67217 INTERIOR DESIGNER FOR UNITED VIDEO SATELLITE GROUP Roseanne Bell Page Zebrowski Architects bellwether design ltd. 320 South Boston, Suite 1400 Tulsa, Oklahoma 74103 918-584-2724 PROPERTY MANAGEMENT Ruffin Properties 7130 South Lewis, Suite 950 Tulsa, Oklahoma 74136 918-493-7100 GENERAL DESCRIPTION The Kensington Galleria (now the Kensington Business Centre) site was originally purchased in 1974. In 1977, a linear shopping center (retail annex) was built to serve the galleria. The construction of the galleria itself did not begin until nearly nine years after the purchase of the site due to the double-digit mortgage rates that prevailed at the time. Finally, in February 1984 (May 1984 for the office tower), the original Kensington Galleria, including a 407-room Sheraton Hotel, was completed. At that time, Sakowitz, a Houston-based department store, was the sole retail anchor for the galleria, which was geared toward a high-income clientele in south Tulsa. The difficult times that fell on the retail industry in general were compounded by the failure of the galleria mall itself to capture its intended target market, which continued to patronize the more accessible Southland Mall. In the end, Dillard's department store (which took over the Sakowitz anchor space) vacated its space, leaving the galleria unanchored. Other retailers quickly departed as well. With a pessimistic outlook for the Kensington Galleria's continued use as a mall, Phil Ruffin of Ruffin Properties, who purchased the property in December 1991 from the Resolution Trust Corporation (RTC) at a cost of only $12 million, saw the handwriting on the wall. The demand in Tulsa was for office space, particularly high-tech office space, rather than another mall. United Video Satellite Group (UVSG), a satellite communications giant with five large subsidiaries (Prevue Networks, UVTV, Superstar, SSDS, and Spacecom Systems) was enticed to move its headquarters from another Tulsa location to the Kensington Business Centre, where it would be the sole tenant for the entire former Kensington Galleria (and a small portion of the former Dillard's). After the lease with United Video was firmed up, conversion of the former mall to office use got underway. MicroAge, a value-added provider of computer services, and Tulsa National Bank also signed leases for space formerly occupied by Dillard's. With all tenants secured, conversion of the retail mall to office space accelerated. Ruffin, who already owned several Marriott Hotels, elected to expand his franchise to include the former Sheraton Kensington Hotel. He reflagged the property the Tulsa Marriott Southern Hills, an integral part of the business center. By 1994, the Kensington Galleria was completely transformed into the Kensington Business Centre, an 814,000-square-foot mixed-use development in suburban Tulsa. Phase I consists of a 310,000-square-foot, 382-room completely refurbished Marriott Hotel (formerly the Sheraton); a ten-story, 183,000-square-foot GBA (164,000-square-foot NRA) office tower, which has undergone few changes since it was originally built in May 1984; and 270,000 square feet GBA (236,000 square feet GLA) of galleria mall space, which has been converted to office space for United Video Satellite Group, Tulsa National Bank, and MicroAge. Like the office tower, the linear shopping center remains virtually unchanged except for a change in the anchor tenant to Office Depot in 1995. Preliminary analyses for potential uses for Phase II are currently underway. Although the office market in Tulsa is "hot" right now, with some offices renting for $15 per square foot and 1.25 million square feet of space absorbed in 1996 (a level not seen since the early 1980s), speculative development will probably not resume until rents reach $18 to $20 per square foot. OFFICE MARKET CONDITIONS The demand for office space that Ruffin Properties foresaw in its market analysis was based on some substantial evidence of a recovering Tulsa office market. For example, CityPlex Towers, the 2.2 million-square-foot monolith that for years had cast a 60-story economic shadow over the rest of Tulsa's suburban office market, is now over 90 percent occupied. Fueled by the successful leasing of the towers, office absorption reached 1.26 million square feet in 1996, a level not seen since the city's oil boom in 1983-1984. Absorption would have been marginally higher had it not been for some slight negative absorption in the downtown submarket. The vigor of the office sector shows little sign of abating, with the telecommunications, aerospace, and manufacturing sectors driving employment growth in the Tulsa area. Indeed, Tulsa has achieved a reputation as a high-technology employment center because of a series of corporate relocations and expansions that followed the city's and state's investment in high-technology infrastructure. The Williams Companies, a petroleum conglomerate, was a leader in capitalizing on Tulsa's high-tech focus. Indeed, Williams decided to use its unused oil pipelines as conduits for fiber-optic cables. The conversion of pipelines from oil to fiber optics signaled the birth of WilTel, a telecommunications giant headquartered in Tulsa. In 1995, LDDS Worldcom, another telecommunications giant, purchased WilTel and moved its operations headquarters and roughly 2,600 jobs to an industrial-park-turned-office-complex in north Tulsa. UVSG—as a major player in cable television and satellite communications and a trendsetter in merging formerly unrelated communications businesses—has over 1,000 employees in Tulsa and is well positioned for even more employment growth. Indeed, UVSG has filled the entire former Galleria space and is expanding into the adjacent office tower. In addition to high-tech companies, firms particularly dependent on sophisticated high-tech infrastructure have been inclined to locate to Tulsa due to the city's cutting-edge infrastructure and choices of alternative service providers. The growing list of such businesses include American Airlines' SABRE Group Reservations Center, First Data Corporation's card services center, Avis Rent-A-Car's WorldWide Reservation Center, State Farm Insurance's regional customer service and data processing center, Dollar Rent-A-Car's headquarters and reservations center, and Thrifty Car Rental's headquarters and reservation centers. The aerospace industry is another growing sector in Tulsa. In 1996, the Boeing Company acquired Rockwell International Corporation's aerospace and defense businesses and, as a part of the deal, Rockwell's Tulsa plant. The Tulsa facility, which will do business under the name of Boeing North American, has added approximately 400 employees since spring 1996, although the number of employees at the plant is still below the 1988 peak of 5,000.