UNIVERSITY OF MARYLAND Colvin Institute of Real Estate Development
2018 Case Study Challenge
Team 7 “We look at each of the different stakeholders needs - the community, tenants, developer, and investors - on - Paul F. Ciminelli - President & CEO Conventus, we came in 4 for 4.” Ciminelli Real Estate Corporation
• With over 20 partners in • An estimated 1,500 • Conventus surpassed all design, engineering and visitors/patients come financial metrics that construction, Conventus through Conventus’ doors Ciminelli Real Estate was completed on time and each week. The impact on Corporation had set out on budget delivering one of the Buffalo Niagara Medical with from inception. the premier Class A Campus is impressive with properties in Buffalo, NY. housing prices and incomes • Conventus was 95% in all surrounding leased prior to its • Nearly 50% of Conventus neighborhoods on the rise. completion; an indication of incorporates recycled the acknowledgment and the building content materials, • Conventus is a catalyst for acceptance of the Buffalo and over 25% of total new development in the Niagara Medical Campus materials were extracted, Buffalo Niagara Medical as a regional leader in the processed and Campus and surrounding medical and life sciences manufactured regionally, Western New York Region. fields, and specifically, of within 500 miles of the site. Conventus as an integral part of the Campus itself.
Table of Contents
page 3 Introduction page 11 Building Analysis
page 4 Context page 14 Sustainability
page 6 Development Team page 15 Financials
page 7 Development Vision page 17 Operational Issues
page 8 Site Description page 17 Development Impact
page 9 Planning & Entitlements page 18 Conclusions Project Outline
Name Conventus Address 1001 Main St., Buffalo, NY 14203 Type Mixed Use - Primarily Medical Office & Research Style Early 21st Century Modern Cost Approximately $100 million Height 8 Stories Area 350,000 SF Features LEED Platinum Certification Green Roof 7th Floor Sold as Condo Unit Developer Ciminelli Real Estate Corporation Builder Arc Building Partners Architect Kideney Architects Tenants Albany Molecular Research Inc. Athenex Pharmaceuticals Kaleida Health KeyBank UB Associates Inc. (UB|MD)
Introduction Conventus is Latin for “coming together,” a Council’s LEED Platinum certification for fitting name for this Center for Core and Shell, and ULI New York’s top Collaborative Medicine, and for this unique award for Excellence in Office Class A facility located on the Buffalo Development. Conventus will also be Niagara Medical Campus (BNMC) in entered into the 2019 BOMA TOBY Buffalo, New York. The BNMC is a awards. not-for-profit medical campus comprised of health care, life sciences research and Conventus is a blend of sophisticated medical education institutions, created to design and functional amenities – a foster conversation and collaboration. gateway for connecting and collaborating, Completed in June of 2015, Conventus and a cornerstone for development within was the first major private investment the BNMC. In developing this facility, within the BNMC, and was designed and Ciminelli Real Estate Corporation (CREC) developed to provide tenant spaces that took important steps to put the building’s support on-campus institutions to attract tenants, the City of Buffalo, and the BNMC new, complementary economic in a leadership position in the medical development. Conventus is connected to community regionally. Conventus is steps virtually all current and future from the public metro rail system, culturally developments in direct proximity allowing rich neighborhoods, established retail and for interconnectivity between the various public services, and from its location at sites. This is just another example of the Main and High Streets it overlooks the fitting nature of the name, Conventus. emerging BNMC.
Conventus is the recipient of eight Conventus is home to nearly 1,000 prestigious design and development employees of the medical and awards, including the US Green Building health-related professions, and an estimated 1,500 visitors per week. With
3 Buffalo Niagara Medical Context Campus Buffalo is the second largest city in New York State. The Buffalo Metropolitan Statistical Area (MSA) is comprised of Niagara and Erie Counties, includes a population of 1,135,230, and ranks in the largest 50 MSAs in the country. First known as the “City of Light” at the turn of the 20th century, Buffalo was a world destination for innovation in science, technology, and commerce. The region’s economy also benefited from the Erie Canal, which connects the Atlantic Ocean to the Great Lakes. However, beginning at the mid 20th century, the creation of the Interstate Highway System and advances tenants including Kaleida Health, UB|MD in transportation had coincided with a and Albany Medical Research Inc. (AMRI), period of deindustrialization. the project’s impact on the BNMC, has Consequently, rust belt cities like Buffalo been impressive. suffered severe economic degradation and population loss. Due to the high construction costs and relatively low rental rates in the Buffalo Today, the largest economic sectors in the MSA, construction of this magnitude is MSA are healthcare, finance and typically undertaken by a public entity education, which have continued to grow rather than a private real estate as fast or even faster than the national and development firm. CREC recognized an worldwide trends. Fortune-500 M&T Bank opportunity, and produced a building that is headquartered in Buffalo, NY with many was constructed on time, on budget, and other large public and private companies exceeded all financial metrics from such as MOOG, New Era, Delaware North inception. and Rich Products also having headquarters in the area. Citibank, Conventus is an exceptional example for KeyBank, GEICO, and Yahoo also have development not only in WNY but across large operations in the region using the the country. The cutting-edge research lower labor costs to fill primarily back office performed by the tenants will impact positions. Together these companies billions of individuals. For example, AMRI’s generate a multi-billion dollar impact on the advanced research and development of region. Western New York also benefits new pharmaceuticals often involve clinical from $85 billion in annual trade at its drug trials held within the BNMC. UB|MD international border between Canada and has twelve different medical practices the United States. administering direct patient care within Conventus. Furthermore, during the Buffalo's economy continues to expand at design and construction of this building, a rate not seen in many decades, with strong emphasis was placed on $11.2 billion in construction projects either sustainability which ensures that completed or underway in the City since Conventus will continue thriving well into 2011, according to a report published by the future. the Buffalo Business First. That figure
4 Demolition of 50 High St. (2007) climbs to an astonishing $19.5 billion when The University's new medical school on the including projects throughout the MSA and BNMC is part of the "UB2020" plan, a not just within City limits. Major comprehensive growth strategy to investments include a $5.8 billion solar increase jobs, enrollment, and research panel production facility, known as Solar funding at the school, the largest public City, which was completed and began full university in New York State, with more production in 2017, and is expected to than 28,000 students across three create 3,000 permanent new jobs when campuses. UB2020 is an initiative to fully operational. Also, the to-be-completed stimulate life science economic $75 million mixed-use hotel/office building development through the technological being developed by Ellicott Development transfer of ground-breaking research into at the corner of Franklin St. and West new business startups. At the foundation of Tupper St., in Downtown Buffalo, is helping this endeavor, is the “Eds and Meds” to fill a growing tourism demand. As principle, which is a catalyst for economic regional and national demand for the development, especially in recovering BMNC services increase, the proximity of Rustbelt cities. this hotel to Conventus may become key to both their continued success. The population of residents aged 55 years or older in the Buffalo MSA is anticipated to The "Buffalo Billion" has also led to critical grow at a compound annual rate of 1.5% state investments at the BNMC. Buffalo over the next five years. Presently, nearly Billion is a New York state government 29% of the total population is 55 years or project led by Governor Andrew Cuomo older; significantly greater than the national that aimed to invest $1 billion in the average. The aging population of the Buffalo, NY area economy. Buffalo Billion region bodes well for Conventus and the uses a combination of state grants and tax BNMC as this age group requires the breaks to spur economic development with greatest amount of healthcare services. one of the primary targets being the Conventus accelerates the advancement BNMC, a consortium of the region's top of specialized medical research and health care, education, and research development, including STEM, and will institutions. The 120-acre site located become an economic driver for attracting one-mile north of the downtown CBD an educated workforce. Combined, these employs more than 17,000 people and factors ensure an increased demand for serves over one million patients annually. specialty services at Conventus and the These remarkable figures are the result of BNMC several recently completed projects in the BNMC including University at Buffalo's With its explosive growth and new jobs, the $375 million Jacobs School of Medicine BNMC with Conventus is a catalyst for a and Kaleida Health's $270 million John R. new era of regional prosperity. Conventus Oishei Children's Hospital. In addition, a is at the center of it all, where for the first $50 million expansion of Roswell Park time, physicians, researchers, students, Cancer Institute is recently completed. patients, and affiliated businesses can connect, collaborate, innovate, and make the Buffalo region stronger – together.
5 1001 Main St. pre-construction following land swap (2008) Development Team CREC elected to partner with Seavest Healthcare Properties, LLC. Based in White Plains, NY and established in 1981, Established in 1981, CREC began as a Seavest is a fund manager and real estate local development firm that has since investment management firm dedicated to evolved into a full service corporate real the medical office and outpatient facility estate firm with a portfolio of more than 16 sector. The firm works with best-in-class million square feet of office, flex, medical, medical office developers to create new industrial, and retail space. Headquartered properties and acquires existing properties in Buffalo, NY, CREC is a leading directly (or with operating partners). developer manager and owner of Seavest invests through dedicated commercial properties, with a team of discretionary third-party real estate funds nearly 200 employees, and operations in focused on the healthcare sector. New York, Florida, Pennsylvania, and Connecticut. CREC specializes in a full range of commercial real estate services, including development, facilities and property management, asset management, tenant & landlord Arc Building Partners specializes in many representation, acquisitions and delivery types such as construction dispositions, among others. management at risk and design build. Arc delivers fast-track project success, while CREC has a strong track record in the tackling complex projects that require true development and ownership of medical partnership, from inception to completion. properties and related healthcare Founded by Frank L. Ciminelli II, Arc development projects. The Development, Building Partners is powered by talented Management and Leasing professionals people who have successfully delivered collaborate throughout design and some of the most important construction construction to ensure efficient operations projects in the region. Multiple Arc team and an optimal tenant experience. members and subcontractors had integral Pursuing LEED and sustainable practices roles on the Conventus project team. are important to CREC’s mission and results in projects that positively impact operations and maintenance, provide a healthful environment for tenants, and benefit the greater community. Under President and CEO, Paul F. Ciminelli, and Kideney Architects, the oldest and largest in collaboration with Kaleida Health and architecture firm in Western New York, was UB, CREC has successfully positioned responsible for the design of Conventus, itself as a leader for Western New York’s bringing extensive experience in premier medical office development healthcare related architecture. The firm project by developing Conventus. As the has experience in other areas of practice region’s largest healthcare provider, and including historic preservation, K-12 anchor tenant, Kaleida Health was education, higher education, corporate instrumental in the design and planning of office, multi-unit housing and Conventus with CREC to build a structure municipal/governmental facilities. that truly fit their needs.
6 Initial Site Work Begins (2012) Development Vision Development Timeline The inception of Conventus dates back to 1993 Purchase of 50 High Street by Frank 1993, when CREC, following a vision for Ciminelli what the future might hold, purchased an old medical office building on a parcel May 2007 Demolition of the medical office adjacent to the current site, across the building at 50 High Street street from the existing Buffalo General Medical Center. The building was Late 2007 Initial design discussions with Kideney Architecture about a purchased because of its location, and replacement building because CREC’s Founder, Frank L. Ciminelli, possessed a keen sense for Late 2011 Land Parcel swap to 1001 Main Street strategic real estate acquisition. Though with Kaleida Health, and the there were a few conceptual plans for beginning of the realization of development of the site, it wasn’t until Conventus years later that the true “highest and best Late 2012 Site work begins use” became more evident. April 2013 Construction on Conventus begins CREC imploded the 13-story medical office building in 2007 with plans for a new Early 2014 Short delay to add an additional floor medical office building that would be at the hub of activity. As plans for the then May 2014 Topping off of structural steel is fledgling BNMC began to come together, completed the site for Conventus shifted to its current June 2015 Completion of Conventus on time & site at 1001 Main Street. The original 50 budget High St. site is now home to the John R. Oishei Children's Hospital.
The building’s program evolved from a With millions of public dollars beginning to traditional medical office building to a be invested in BNMC infrastructure Center for Collaborative Medicine that through the Buffalo Billion project, it was would bring together the best and brightest time for the private sector to demonstrate in medicine, research and education. This, support. With a commitment of nearly $100 of course, involved enormous collaborative million, Conventus became the first major effort between CREC, Kaleida Health and private investment. The project re-shaped its new John R. Oishei Children’s Hospital, an environmentally contaminated lot into a as well as the University at Buffalo and its state-of-the art center for collaborative new Medical School. The three buildings, medicine. The announcement of the which total over 1.4 million square feet, are project spurred a renewed private sector located adjacent to one another on nearly interest in BNMC and many private six acres within the BNMC and are brought developers have since purchased nearby together through a series of properties to develop supporting uses or interconnected walkways; a connotation to facilitate supporting business. the name Conventus.
7 Foundation construction begins (2013) Site Site - April 2002 Description Original 50 High Street site The Conventus Building site is situated at 1001 Main St., the north end of the rapidly expanding BNMC in downtown Buffalo. Current 1001 Main Street site Referred to as the “Northern Gateway” serving as a main point of entry to the BNMC, Conventus is located on a site of only 1.41-acres or 61,226 square feet with Conventus truly being a leader in the responsible and efficient land use.
Land Exchange Initially, the medical office building that was Brownfield Tax Credits there must be a the precursor to Conventus was planned to certain amount of contamination on the site be located adjacent to the current site from past uses. After this initial where Kaleida Health’s new John R. qualification, the level to which the site is Oishei Children’s Hospital currently cleaned then determines what percentage stands. As building plans evolved, CREC of benefits the project may receive. To and Kaleida Health agreed that it would be promote development on the site, and not in their best interests to swap land parcels, just cleanup, NYS offers incentives to help due to programming and size offset remediation costs. The underground requirements. The land exchange was tanks that had leaked allowed CREC to executed in the form of a long-term ground take full advantage of the Brownfield Tax lease with CREC as the lessee, and Credit Program by contributing to the Kaleida Health as the lessor. To ensure a equity required for the project. “win-win” for both parties, CREC received Conveniently, the program required the a more visible and strategic site location removal of contaminated soil which made it for Conventus as a center for collaborative financially feasible of underground parking. medicine. Kaleida Health received full land Special care was taken in consideration of assemblage of the adjacent site for the the nearby Metro Rail below-grade tunnel, future John R. Oishei Children’s Hospital including vibration monitoring and and continued income from the ground three-dimensional scanning. lease with CREC. Transportation Environmental Remediation Several different forms of transportation The land parcel where Conventus stands are accommodated throughout the site, today required environmental remediation most prominently the metro rail with a to address petroleum contamination from a station at the adjacent Jacobs School of former gas station and its underground Medicine and Biomedical Sciences storage tanks. CREC and Kaleida Health building. This rail line which serves over 5 entered into the New York State million passengers annually. The NFTA, a Department of Environmental regional public transportation authority, Conservation Brownfield Cleanup began a formal study to expand the rail Program. A remedial investigation and IRM north to the University at Buffalo’s main activities were conducted concurrently campus. This line would service the some from December 2012 to August 2013; of the region’s most vibrant suburbs. contamination was found on 80% of the Conventus also has direct access to a 2-acre land parcel. To qualify for major four-lane thoroughfare providing
8 Foundation construction is completed (2013) Planning & Preliminary Rendering Entitlements The land exchange between CREC and Kaleida Health was instrumental to achieving a cohesive environment between all adjacent sites. It allowed Kaleida Health’s new John R. Oishei Children’s Hospital to be directly connected to the Buffalo General Medical Center, Gates Vascular Institute and Conventus.
As a key building tenant since the project’s inception, Kaleida Health had originally planned to locate its Ambulatory Surgery Center (ASC) within the Conventus Building. However, due to the complexity of surgeries planned to be performed, a seismic requirement for the structure, north-south access through Buffalo. Public comparable to what is provided for transit is readily available with ten different hospitals, would have been required to be public bus lines all within a tenth of a mile. added to the entire building at a Additionally, the BNMC is pedestrian considerable cost premium. Through friendly featuring large walkways, Reddy extensive collaboration with Kaleida, it was BikeShare, ZipCar, protected bike storage, determined that their neighboring John R. as well as priority carpool parking, and an Oishei Children’s Hospital would be on campus bus shuttle service. directly connected to Conventus at the second and third floors, where Kaleida Neighborhood Health occupies space within Conventus. The BNMC is located north of Buffalo’s This approach allows Conventus to still Central Business District. To the west of accommodate ASC intake and discharge, the site is the Allentown District, which is while surgeries are performed in the home to many of Buffalo’s most popular adjacent hospital. restaurants, cafes and bars, as well as cultural events including the annual During initial design and development Allentown Art Festival. Home to the discussions, the building’s size and use Theodore Roosevelt Inaugural Site, the were altered several times from plans to Allentown district is listed on the National include standard office space to hotel use, Register of Historic Places, and is one of all ranging between five to ten stories in the largest historic districts in the country. building height. Additionally, interior and On the east side of the BNMC is a exterior design was ever changing residential neighborhood locally known as throughout the planning process. the “Fruit Belt”, named for its former Interestingly, retail use on the ground floor orchards and now for its fruit-named was the only commonality throughout the streets. The surrounding neighborhoods design process. This is because of CREC’s have undergone significant revitalization vision that the expansive plans of the as a result of the development occurring BNMC would necessitate a consistent within the BNMC. demand for quality ground floor retail for the tenants and community.
9 Steel superstructure construction begins (2013) Initial designs from Kideney Architects quickly advanced the seventh-floor design, included substantially more glass than even while steel was being erected, what is seen today, but there were also impressively adding another floor to the design concepts with little to no glass and building with only 4 additional weeks to the minimal windows in attempts to reduce the construction schedule. This short delay to costs and increase efficiencies. Ultimately, add an additional floor was made possible after much discussion between Kideney because of the original intention to make Architects and CREC, a building with an Conventus seven floors of leasable space elegant mix of glass and solid mass was and the efficient design of the structure selected, resulting in Conventus being an itself. exceptionally well-designed structure, meeting all financials requirements. This The seventh floor is owned and occupied delicate balance is key because without by AMRI. The project was converted to a CREC’s vision and commitment to a condominium structure in January of 2015, design that would create economic value, when the seventh-floor was sold to a Conventus may have ended up looking like conduit entity of NYS. The addition of a many of the other typical concrete medical seventh floor changed the ownership of the facilities found throughout the country. building Conventus, fortunately it did not have major impacts on the financing of Early on, Conventus was advanced to the construction. design development stage with 7 stories above grade. However, to limit the amount Public Incentives of speculative space, construction Conventus faced a minor setback in documents were completed for only 6 obtaining incentives from the Erie County stories. Due to the nature of real estate in Industrial Development Agency (ECIDA). Buffalo, and commercial construction Tax breaks were put on hold over concerns lending practices in general, financing of the building would house medical offices, large amounts of speculative space is due to no pre-signed leases from difficult to accomplish. bio-medical research companies at time of inquiry. The ECIDA did not want more Adding a Seventh Floor personal doctors’ offices as they do not As a result of the project’s success provide the economic impact the ECIDA following the design development stage sets out to provide. CREC were able to and nearly all of the medical/research persuade the Board to grant tax space being pre-leased, CREC received a abatements as a clearer picture of what request for additional space during Final ECIDA incentives for this building construction. Steel was being erected for include a mortgage tax recording, and the construction when Albany Molecular sales tax abatement. Research, Inc. (AMRI), funded through theBuffalo Billion Initiative, was looking for Brownfield tax credits were used to finance space. Through a public-private the cleanup of environmental partnership with New York State, a seventh contamination on this site. Conventus’ floor was added as home to AMRI, which owner applied for New York State’s provides pharmaceutical and Brownfield Clean-up Program and were biotechnology industries with drug granted tax credits on site preparation discovery research, development costs and tangible costs based on the level andmanufacturing. CREC’s project team of clean-up.
10 Steel superstructure construction continues (2013) Stacking Diagram & Tenants
Albany Medical Research Inc. 7th Floor (sold as a condo unit) Athenex Pharmaceuticals 6th Floor
UB Associates Inc. (UB|MD) 4th & 5th Floors
Kaleida Health 2nd & 3rd Floors Key Bank & Conventus Café Ground Floor
Conventus is well positioned to benefit from its strong affiliation with Kaleida Building Analysis Health. Beyond its commitment to The state-of-the-art, seven-story, 350,000 Conventus with leasing 109,000 square square foot mixed-use medical feet on a long-term lease for several office/research building features a glass outpatient care facilities, Kaleida has also curtain wall and insulated metal panel made a significant long-term investment in façade. Conventus sits on a 1.41 acre the BNMC as its primary destination for the urban site, with seven stories above-grade delivery of healthcare services. The BNMC and a mechanical penthouse, as well as is already home to Kaleida’s recently two levels of below-grade parking totaling renovated flagship hospital, the 501-bed more than 300 parking spaces. With the Buffalo General Medical Center as well as highest quality Class A medical the HighPointe on Michigan, a 300-bed office/research finishes and design skilled nursing facility opened by Kaleida in features, Conventus has obtained an December 2011. In addition, Kaleida impressive LEED Platinum certification, commenced operations at the new $291 solidifying sustainable design, building million Gates Vascular Institute in March elements and operation. Staff, patients 2012. Kaleida’s commitment to serve as and visitors enjoy a variety of amenities the anchor tenant to the project, along with including a KeyBank branch and a locally its larger investment in the overall owned café operated by Queen City Campus, demonstrates the strong Foods, provided through 28,000 square alignment Conventus will have with the feet of ground floor retail. BNMC System for years to come.
Site Plan
11 Athenex’s office area
Additionally, Conventus serves as a key facility for UB|MD to house its rapidly growing physician base occupying 108,000 square feet. UB2020 has an initiative in place to recruit 100 additional specialty physicians by 2020. The significant majority of these physicians will be faculty members of the University at Buffalo School of Medicine and Biomedical Sciences. Conventus is in a prime location Building Operations to house this growing physician base A building energy management system currently UB|MD has twelve practices monitors the ceiling mounted high located at Conventus. These include efficiency water-to-air heat-pumps that dermatology, family medicine, internal provide heating and air conditioning to all medicine, neurology, neurosurgery, common areas, as well as, the variable obstetrics, gynecology, orthopedics and speed heat-pump loop pumps circulating sports medicine, pathology, pediatrics, water through piping risers to serve tenant psychiatry, surgery and urology. With the spaces. The building is serviced by a 23kV exception of complex surgeries, each spot network electric service with three practice administers direct patient care on 500kVA transformers. site. UB|MD Lobby Main penthouse space features three high efficiency condenser boilers, hot water pumps and condenser loop on variable speed with over 30% more energy efficient heating and cooling than required by code. The generator room includes four indoor 500kW diesel standby generators with the ability for all four to be able to come up to speed, synchronize and activate the transfer switch in 6 seconds. These generators have the ability to supply power Lastly, Conventus is also occupied by to 85% of the building for 12 to 18 hours. Albany Medical Research Inc. (AMRI) and Athenex Pharmaceuticals, which are Penthouse generator being installed global contract research and manufacturing organizations aimed to improve patient outcomes and quality of life. With locations in North America, Europe and Asia, AMRI’s team combines scientific expertise and market-leading technology to provide a complete suite of solutions in Discovery, Development, Analytical Services, API Manufacturing and Drug Product. Athenex is dedicated to delivering innovative drugs that can have a life-changing impact on cancer patients.
12 Art Exhibit Connectivity Conventus is also committed to The solution to construct a connector incorporating public art into the fabric of between the second and third floors of the building to raise awareness about how Conventus and the John R. Oishei art can expand economic revitalization in Children’s Hospital resulted in more than a Buffalo. CREC has established satisfied tenant and considerable cost relationships with several organizations to savings. This connection brings clinical, incorporate unique art into their properties. educational and research components together, facilitating a synergistic Local artist Terri Katz Kasimov was environment. commissioned to create two unique pieces for Conventus. “Journey…Coming Conventus serves as the hospital’s “front Together” is a 2’ wide by 286’ long canvas, door” to the Ambulatory Surgery Center to vibrantly painted with acrylics and playfully accommodate ASC intake and discharge, displayed in the double-high lobby at the while surgeries are performed in the High Street Entry. Displayed at the north adjacent hospital. Moreover, the added side of the lobby, “Construction…A Dream connectivity extends to a larger network of to Reality,” is mixed media collage on vital, planned and existing second floor arches which incorporates elements from level “coatless” connections on the BNMC, the project construction site, along with linking Conventus to the John R. Oishei contributions from the project team and Children’s Hospital, Buffalo General contractors, into a richly layered narrative. Medical Center, Gates Vascular Institute, Roswell Park Institute, University at Buffalo Terry Katz Kasimov’s artwork displayed in the lobby of Conventus Jacobs School of Medicine & Biomedical Sciences and the Metro Rail Allen/Medical Campus Station.
Walkway to Children’s Hospital
13 Steel superstructure topping off (2014) Sustainability CONVENTUS Conventus is a testament to sustainability Buffalo, New York
HAS FULFILLED THE REQUIREMENTS OF THE FOLLOWING LEVEL OF CERTIFICATION ESTABLISHED BY THE U.S. GREEN BUILDING COUNCIL and profitability coming together in a IN THE LEED GREEN BUILDING RATING SYSTEMTM AND VERIFIED BY THE GREEN BUILDING CERTIFICATION INSTITUTE.
renowned commercial real estate building. LEED FOR CORE & SHELL Sustainability is a valued design principle for CREC, it ensures their properties operate efficiently, provide a healthful August 2015 environment for tenants and to the greater S. RICHARD FEDRIZZI, PRESIDENT & CEO MAHESH RAMANUJAM, PRESIDENT U.S. GREEN BUILDING COUNCIL GREEN BUILDING CERTIFICATION INSTITUTE community. Conventus transformed a contaminated and uninhabitable land parcel into an icon for the BNMC and an Storm-water Management industry symbol for sustainable In optimizing land usage on the 1.41 acre development. site, the building footprint of more than 46,000 square feet required an innovative 2016 LEED Platinum Certification solution for storm water management. Conventus was awarded LEED Platinum Representing the largest in the region, certification for Core and Shell by the U.S. Conventus’ 12,000 square feet of green Green Building Council (USGBC). This roof limits storm water discharge and designation places Conventus in an elite restores the natural habitat. The mix of group of a few in New York State to have native, low maintenance sedums and received LEED Platinum certification for alliums attract pollinating bees and Core and Shell and the only project in chirping crickets, while adding beauty to Western New York with the distinction. The the rooftop that will be enjoyed by users of LEED rating system, developed by the neighboring buildings, the John R. Oishei USGBC is the foremost program for Children’s Hospital and the School of buildings, homes and communities that are Medicine & Biomedical Sciences. designed, constructed, maintained and Additionally, the vegetation and white operated for improved environmental and roofing membranes reduce Conventus’ human health performance. “heat island effect.”
Materials Custom Wind Screens During construction, the Conventus team The main entrance located on High Street, was conscientious of the materials and is the highest point in the City which can methodologies used. Nearly 50% of the create troublesome wind conditions. building materials incorporate recycled Computational modeling studies were content materials and over 25% were performed to provide data that would extracted, processed and manufactured inform the best design approach. Wind regionally, within 500 miles of the site. velocities at the entrance were found to Over 62% of wood-based materials and reach speeds significantly higher than the products are certified in accordance with ambient wind velocity. In order to mitigate Forest Stewardship Council. Low emitting the wind speeds and improve pedestrian paints, coating, carpet, composite wood experience, CREC reached out to local and agrifiber were selected to improve professionals and the collaboration indoor environmental air quality and over resulted in a functional and beautiful 80% of project construction waste was solution, Affine Shells, iconic custom wind diverted from landfills. screens crafted with stainless steel perforated metal panels and stainless-steel plates that diffuse the wind.
14 Exterior shell construction continues (2014) FinancialsFinancials Capital Stack In the early part of this decade, when the M&T Bank $32.5 Participation Debt million BNMC plans fully began to take shape, Seavest CREC adjusted its vision for the site and Equity M&T Bank First Niagara $32.5 saw the need for a high-end Class A (24.5%) Debt (32.5%) Participation Debt million CREC medical office and research building. It Equity was then that the plans for a 6-story (10.5%) First Niagara Seavest Equity $24.5 medical office building wasfinalized, only Debt (32.5%) million to be changed during the construction CREC Equity $10.5 process to add a 7th floor. This was done million to accommodate the needs of the specific user and the floor would ultimately be built required CREC to excavate 40’ below as a condo unit and sold to a NYS affiliate. grade to remove all of the contaminated With a total project cost nearing $100 soil, it facilitated the construction of the Million, Conventus is not only one of the underground parking and helped to pay for newest Class A buildings in Buffalo but one the underground parking. The cost of of the most expensive. Construction underground parking in Buffalo is usually remained on time and budget throughout cost prohibitive, but since the Brownfield the project with the only delays resulting Tax Credit Program rewarded CREC for from the tenants changing their needs that excavation, it made underground which resulted in the altering the parking financially feasible and allowed construction plans. them to use the whole site for the building.
As a result of the large estimated However, due to prior engagement of the construction costs of Conventus, CREC Brownfield Tax Credit Program before the decided that it should seek out an equity Seavest partnership, the way that partner in order to make the construction Seavest’s equity contribution was brought and operation of Conventus feasible and into the project was unique. If CREC was share some of the risk. It was at this time to include Seavest as a traditional equity that CREC began their search for a limited partner, its name would also need to be equity partner that would allow CREC to included on the Brownfield Tax Credit. This maintain all control in design, construction would alter the original agreement and management roles. It was decided between CREC and the government through the help of an investment banking agency and under the Brownfield firm that Seavest Investment Group would agreements this would result in a default be CREC’s partner on Conventus. The under the program. Defaulting would equity structure between the two cause CREC to waste unnecessary time companies were split between CREC and and money reapplying for the credit. Seavest at a 30 to 70 ratio, respectively. Because of this, a creative solution was agreed upon to bring the Seavest equity The Brownfield Tax Credit Program was share on as convertible debt allowing the also a significant part of the overall Brownfield Tax Credits to be used as financing structure. Estimating a 20% originally intended without default. Upon all Tangible Tax Credit on portions of the $100 requirements of the Brownfield Tax Credit million project results in an approximately being met satisfactorily, the Seavest debt $10 million refundable tax credit after their would be converted into equity. sale to outside investors. Additionally, because the approved remediation plan
15 Interior construction continues (2014) Capital Uses Hard Costs $81 million Soft Costs Soft Costs $19 million (19%) (including leasing and developer fees) Hard Costs (81%) Total Costs $100 million
With the equity portion solved, CREC still Current asking rents are approximately needed to seek construction financing. $30 to $35 per square foot on the first-floor With CREC wanting to keep as much of retail space and information provided by the project as local as possible, it sought CREC shows that medical office tenants out local lenders. The only two locally occupying space on the 2nd through 6th based lenders capable of handling a floor have rental rates between $23 to $28 project of this magnitude were M&T Bank per square foot. With these rental rates at and First Niagara Bank, two mid-sized the upper end or above typical rates seen super-regional banks with headquarters in in Buffalo, it is clear how CREC was able to Buffalo. Ultimately it was agreed that of the blend financial feasibility with a cutting nearly $100 million project cost, debt edge and sustainable building that is financing would cover 65% or $65 million Conventus. split evenly between M&T Bank and First Niagara Bank at 50% or $32.5 million CREC is typically a “build and hold” each. Due to the size of this construction company, managing their assets for many loan it was only logical that the lenders decades. But because of their equity would want to reduce their exposure to one partnership with Seavest, this strategy was project by sharing some of the debt Even altered slightly. The partnership intended to with this 50% sharing for First Niagara it hold the property approximately five to was the largest single loan ever made in seven years, when the partners would their history at the time. In late 2015, decide whether to extend the partnership following the completion of Conventus, or CREC would buy Seavest out of its First Niagara Bank was acquired by Key share. Following two years of development Bank. and construction, and three years of operations, the partners decided to sell the With a significant portion of the building property to a Hong Kong investor, which is pre-leased to recognized stable tenants, an affiliate of Chevalier International. While this not only helped the ability to obtain this was outside of what CREC typically financing, but also with returns. Conventus’ does, the buyers presented CREC with a proforma cash–on–cash projections compelling offer and on March 9, 2018 indicated an approximate 8% return with a Conventus was sold for $122 million. mid-teen internal rate of return, which is an CREC continues to manage day-to-day impressive feat for Buffalo given the costs operations and is the property’s primary of new construction and the relatively low leasing agent. rental rates seen in the market.
16 Exterior shell completed (2015) Operational Issues As a result of the strategic planning that a STEM educated workforce and took place early on and throughout innovative startups due to the Conventus’ design phases, to date, there collaborative environment. This does not have been no major operational issues. stop just at Conventus, but thanks to the Examples of CREC’s effective planning Buffalo Billion program, this expansion of include their anticipation of the high paying jobs in the BNMC continues seventh-floor addition, as well as, the to grow across all development that has addition of a fourth generator to fit a or will take place. Not only did CREC, the specific tenant’s requirements. tenants and employees of Conventus benefit from this project, the region This is a testament not only to the benefited from a cutting-edge medical design, but to CREC’s management center, and an increased tax base. abilities, which shows that they address any and all minor issues before they Conventus’ unique tenant mix brings become major. CREC tests backup together a variety of medical research systems regularly to ensure they’re and direct care. UB|MD administers functioning properly and if an emergency direct patient care across a range of does occur, the tenants of Conventus specialties ranging from neurology to and their delicate and valuable research pediatrics. AMRI is performing samples are not affected. state-of-the-art medical research to drive new drug discoveries in developing new pharmaceuticals that treat and prevent Development disease, while improving quality of life. Many of their drugs are used in clinical Impacts trials, which are conducted at the BNMC. Conventus is one of the largest private Conventus’ connectivity enables ease of real estate investments made in Buffalo access between research areas and this millennium and the first major private direct patient care centers, creating an investment in the BNMC. Conventus’ environment for collaborative medicine success can be broken down into three and patient care. core categories, it solidified the BNMC as a regional medical center through its With Conventus being the first major research and medical tenants, private development on the BNMC, Conventus serves people from all naturally there was some risk for CREC. socioeconomic levels and it has acted as With thorough due diligence, incentives, a catalyst in revitalizing the surrounding and a motivated tenant base, Conventus neighborhoods. was able to be realized. Overall, through a collaborative design process among Conventus was able to secure the CREC, Kaleida Health, the University at largest medical provider in the region, Buffalo, the design and construction Kaleida Health, as a main tenant and affiliates, and the City of Buffalo, CREC several highly specialized tenants, was able to deliver a striking high-class bringing hundreds of high paying jobs to sustainable building that furthers the the area that would have otherwise gone progress of the BNMC and sets a elsewhere. Many of the new jobs attract precedent for future developments.
17 Green roof of Conventus and Buffalo skyline Conclusions Conventus is where proximity and outpatient care. As the population of not potential meet. As a unique project at a only Buffalo, but the nation as a whole time when Buffalo is experiencing a continues to age, the demand for the renowned renaissance, Conventus was services offered at the BNMC and able to take full advantage of a market that Conventus will see an increased demand. had been severely depressed for many Additionally, an “Eds and Meds” strategy decades. Conventus represents the first for the City not only benefits the region but major private investment on the BNMC directly impacts Conventus with what it which reflects a level of confidence that needs with a robust tenant base to be a CREC had in the campus’ future. successful piece of the BNMC. Conventus Conventus brings together research in integrates with its neighboring sites as a AMRI and Athenex, clinical care in Kaleida, focal point for the BNMC, and with LEED and academic research and care in Platinum certification, Conventus is an UB|MD at one single location. This icon for sustainability, inspiring projects for encourages interaction among each future developers entering the field. It has discipline, and therefore, improves clinical been a long journey for CREC since the care, research, innovation and academics. original purchase of the land back in 1993, but it is one that can be remembered With the blend of public and private money fondly and knowing that Conventus has going into the BNMC, Conventus is able to and will continue to make a lasting impact connect and provide value to the on Buffalo and the Western New York neighboring facilities through research and Region.
18 Buffalo Niagara Medical Campus ©Austin Casselberry