Washington Lawyer

Our New Home: Investing in the Future

From Washington Lawyer, February 2016

By Jeffery Leon, David O'Boyle, and Tim Wells

Our New HomeNavigating a commercial real estate deal is an arduous task. Any organization, be it a law firm, a nonprofit, a private business, a solo practice, or a government agency, must consider a myriad of factors in contemplating relocation: Is it better to rent or buy? Are economic conditions ideal to finance the project? Are zoning and land use laws favorable? What design and space specifications suit the organization's needs now and in the future? What are the primary considerations for the types of spaces to consider? These questions, and many more, need to be answered before pen is put to paper and a real estate transaction is finalized.

Recently the D.C. Bar embarked on such a journey. With the assistance of an expert team of attorneys, architects, real estate brokers, construction project managers, bankers, and auditors, the Bar began a multiyear effort to create a new home. In considering its new headquarters, the Bar undertook a close examination of real estate market conditions and developed a comprehensive plan that incorporated the business needs identified by membership and staff during an intensive period of data collection.

"Knowing what our members want is vital," says immediate past D.C. Bar president Brigida Benitez, who serves on the Bar's Building Advisory Task Force. "Membership input informed our decisions at every stage of the process."

On October 27, 2015, the Bar's Board of Governors signed an agreement to purchase land at 901 4th Street NW in the heart of the thriving Mount Vernon Triangle neighborhood, where the Bar will design and build a state-of-the-art new headquarters expected to be completed by late 2017 or early 2018.

At the outset of the journey, the Bar navigated steps any organization must go through in putting together a complex commercial real estate deal. Bar staff and officers worked together to articulate a clear vision of what the new home should provide the Bar and its members, as well as to consider the workplace environment, financial requirements, and legal considerations, and to build consensus among the stakeholders.

The end result? A development project that will provide Bar members with a place to gather, network, and learn for decades into the future—a place at the heart of a dynamic professional community.

Owning vs. Renting

Kenneth Schwartz

The Value of Ownership

"The main thing is that the Bar has decided to become an owner of real property rather than a tenant. When you're a tenant under a lease in downtown Washington, D.C., the owner takes on certain responsibilities as a landlord that the tenant doesn't have to worry about. Once you become an owner of real property, you become responsible for those things. If the roof needs to be replaced, or the plumbing or the electrical systems are in need of repair, then you have to go out of pocket and take care of it.

Risks and Rewards

So there are some financial risks that accrue when you become an owner. But there are also benefits, which include control over property that gives you the ability to design and utilize space in a way that best meets the needs of the organization. You don't have to ask permission...to build out the space to facilitate education programs, or to maintain a conference center, or to hold a pro bono clinic. You can also lease excess space in whatever way you want to maximize your revenue stream. Overall, the benefits of ownership are far greater than the associated risks."

—Kenneth L. Schwartz, partner at Arnold & Porter LLP
Provided pro bono support on Bar's building project

The Bar's efforts started in earnest in March 2014, but planning for future occupancy needs was initiated in 2009 when the Bar's Finance Committee recommended the establishment of a building reserve fund. Established in the wake of the 2008–2009 recession, the purpose of the fund was to provide flexibility in future occupancy decisions.

That act of forethought paid major dividends. Since the reserve fund was created, the stock market has maintained a years-long bull run that boosted the fund at a time when interest rates were dropping to historic lows.

"We have a limited ability to control the macroeconomic factors that drive the Bar's annual operating costs," explains D.C. Bar President Tim Webster. "The current market provides us with the unprecedented ability to lock in long-term savings by establishing fixed annual mortgage costs."

Prior to making the decision to become an owner rather than a tenant, the Bar conducted exhaustive studies that compared the costs of buying versus renting. Working closely with commercial real estate services firm Savills Studley, it was determined that buying a building would save the Bar a minimum of $25 million over 30 years. During that time, the Bar also will build equity through ownership, which the organization will be able to leverage in the coming years—an advantage unavailable to the Bar if it continued to lease office space.

Nicole Miller"We ran an extensive financial analysis and went through many models looking at the benefits and value to the Bar of owning and how much [it] could save over a 30-year period," says Nicole Miller, senior managing director at Savills Studley. "We went out into the marketplace to examine what was out there and what best fit the criteria and goals the Bar established upfront."

"The Bar chose to invest in its future," says Demetri Koutrouvelis, senior managing director at Savills Studley. "Instead of paying leasing costs, the Bar has an ownership opportunity that translates into considerable savings."

Scott M. Johnston, principal at the D.C. office of the commercial real estate advisory firm Newmark Grubb Knight Frank, which acted as an independent third party evaluating Savills Studley's research, agrees with the Bar's decision to buy. "The market in D.C. is slowly becoming a more balanced market in renters versus buyers. The D.C. Bar acted at the right time to purchase its building, and Savills Studley did a great job with its analysis."

An Exhaustive Search

Based on the Bar's criteria, Savills Studley identified a wide array of properties that could meet the Bar's needs. Nearly 40 different properties were considered, including existing buildings, vacant sites, and redevelopment projects.

D.C. Bar Headquarters RenderingAmong the Bar's chief requirements were a floor plate large enough to accommodate educational and event programming; accessibility by Metrorail, Metrobus, and the Capital Bikeshare network; an abundance of natural light;and an amenity-rich neighborhood.

According to Miller, once the preliminary vision for a new building has been defined, a firm like Savills Studley can work with the organization to assess the pros and cons of the available options. "It takes months of planning, programming, and discussions with various members of the organization to thoroughly understand what [they are] looking to achieve and how best we can help them do so," Miller says.

Ultimately, the site at 901 4th Street NW fit the bill—a 100,000-square-foot corner location with access to four Metrorail stations, extensive Metrobus service, three Capital Bikeshare stations, and more than 45 restaurants and retailers within walking distance of the future headquarters building.

In addition to articulating goals, it is imperative to be aware of and to define constraints that relate to cost and location. For example, the D.C. Bar felt compelled to avoid expenditures that would require a spike in dues while also being confined to sites within the District's boundaries.

"The economics of the project were challenging because all of the sites in the central business district were very expensive," says Savills Studley's Koutrouvelis. "That led us a little outside of the initial search area, but still within the core of D.C."

In expanding its initial search area, the Bar was able to limit its capital outlays. "The major benefit to the members is the long-term stabilization of real estate costs," Miller says. "With that, the Bar is able to put money and resources into the core functions that serve the membership as opposed to paying the escalating rents in D.C. that leasing would require. The cost stability of purchasing also includes the stability of having a permanent home in a vibrant neighborhood."

Why Mount Vernon Triangle?

Mt. Vernon Triangle mapThe new headquarters will be located in the Mount Vernon Triangle neighborhood close to downtown, the local and federal courts, Congress, government agencies, the Georgetown University Law Center, and much more. In the past decade the neighborhood has undergone a massive transformation, bringing in scores of residential, retail, dining, and transit options that make for a desirable location. Mount Vernon Triangle has been lauded by The Washington Post as a successful example of urban planning and development, thanks in part to the forward-thinking approach adopted by a small group of developers, two of which, Quadrangle Development Corporation and The Wilkes Company, are major participants in the Bar's project.

Twelve years ago Chris Gladstone, president of Quadrangle, and Sandy Wilkes, chair of The Wilkes Company, partnered to develop the neglected Mount Vernon Triangle area. "The Triangle was a lunar landscape when we started out," Wilkes says. "It was a sea of parking lots!" Yet, Wilkes and Gladstone shared a dynamic vision of what those 25 desolate square blocks adjoining downtown Washington could become.

Quadrangle and Wilkes envisioned a neighborhood that was safe, accessible, and offered robust amenities. Seeking outside opinions from urban planning and architecture firms, a master plan was crafted for a mixed-use development that would include more than 2 million square feet of commercial real estate available.

"Mount Vernon Triangle represented an opportunity to have a coordinated, thought-through plan for the development of the area over a several-decade period," Gladstone says. "Together, the property owners have joined forces to realize that opportunity."

The desire to locate in a unified and engaging neighborhood is evident in the design principles adopted by the Bar. The building's first floor will have 14-foot-high ceilings with retail options. There also will be a rooftop deck, conference and classroom space, and office space for the Bar. The upper floors will be leased to outside tenants, providing the Bar with a revenue stream that will help offset costs. The building will occupy a corner lot with all four sides open above the second floor—a rarity in the District of Columbia—providing an abundance of natural light.

Wilkes and Gladstone are confident that Hartman-Cox Architects, the firm designing the Bar headquarters, will give the building a timeless quality that will make it striking for years to come. "The building has to have a high level of functionality," Wilkes says. "The best way to do that is to make sure that everything is thoughtfully considered, not only in how this building functions 5 years from now, but also 10, 15, and 20 years from now."

Gladstone adds: "We've worked with many organizations, and the level of due diligence, care, and thoughtfulness brought to the process by the D.C. Bar to evaluate every aspect of this plan is as thorough as anything I have seen in 40 years in the business."

Welcome to the Neighborhood

Wilkes, Gladstone

"In everything we do we strive to be engaged with the surrounding community. We don't want our clients to feel like aliens who have landed in an unfriendly place. In Mount Vernon Triangle, the Bar will have a welcoming community—churches, residents, a nationally prominent law school, restaurants, retailers, law firms, and, of course, the courts. All of them are extremely happy that the Bar is going to be a new neighbor."

—Sandy Wilkes, Chair of The Wilkes Company

"There has been a great deal of attention focused on making sure that the building is pleasant, functional, and light-filled. We want the Bar's headquarters to be a pleasure to visit and a pleasure to work in. The thousands of visitors who come to attend Bar events will energize the neighborhood. We're elated that the Bar selected Mount Vernon Triangle."

—Chris Gladstone, President of Quadrangle Development Corporation


Conducting Due Diligence

A host of legal issues need to be considered in any large commercial real estate deal. At the start of the project, the Bar enlisted the help of a team of respected real estate lawyers to ensure a smooth transaction that protected the Bar's financial interests.

Kenneth L. Schwartz, a partner at Arnold & Porter LLP, has represented the Bar on a pro bono basis throughout the process. He explains that it is important for counsel to be involved at an early stage to advise clients on the terms and conditions of the initial documents, as well as to shape the structure and content of the deal as it progresses from planning to implementation. When lawyers are involved early, they are better able to advise clients on issues that inevitably arise.

Commercial real estate transaction lawyers have a variety of responsibilities, Schwartz explains, including negotiating the best possible deal for their clients, performing due diligence to make sure there are no problems with the building site and that the project will not conflict with land use or zoning regulations, as well as negotiating loan documents with lenders.

"Land use restrictions and the risks of construction and development are often overlooked until an unforeseen problem pops up," Schwartz says. "So you have to focus on that early. How do you minimize risks? How do you limit the possibility that costs are going to spiral out of control?" Those considerations need to be hammered out and fully understood before a shovel hits the dirt.

To have the confidence that its vision for the location could become a reality, the Bar brought on Allison C. Prince, a director at Goulston & Storrs PC, as zoning counsel. The District is highly regulated when it comes to land use and zoning. Before entering into a real estate transaction, an organization must determine whether the intended use for the property is permitted, whether it can build to the height and density needed to achieve its goals, whether the project is subject to design review, and whether there is a burden on the site. A review of title and survey is necessary to ensure that everything is "within the parameters that are acceptable and don't present significant legal risks from the standpoint of the owner and lender," Schwartz says.

"You can't make assumptions about what one can do with a site," Prince adds. "There are horror stories where people have bought a building for an intended purpose, only to find out that the use is not permitted. Other people haven't fully vetted the historic potential of a property, and then it gets landmarked and their construction program can't go forward."

To avoid such pitfalls, due diligence is essential. "[Washington, D.C.,] is a tough city," Prince says. "It's very exciting and beautiful, architecturally, but it is not a city where you can assume that whatever you want to do is going to comply with local zoning regulations."

Envisioning a Work Environment

Architectural design has a fundamental impact on how an organization conducts its business and on how people interact. The way interior space is utilized is a frequently underappreciated aspect of the initial planning process. For its new headquarters project, the D.C. Bar obtained the services of Alliance Architecture, a North Carolina-based firm with extensive experience and an office in the District of Columbia. Alliance carries an impressive résumé of projects, including work for firms such as Bean Kinney & Korman, P.C.; Cooley LLP; and Venable LLP.

"How do we use the building to tell the story of the D.C. Bar and its role in the legal community?" asks John Warasila, Alliance's founding principal who established the firm in 1995. Warasila says it's definitely a question to keep in mind during the design and construction process, as the building presents an important visual image to visitors and passersby that, if done skillfully, projects a positive professional identity to the community at large.

"The building stands alone and has its own identity," says Vandana Dake, a partner and architect at Alliance, "and that can attract members of that association."

Alliance is working to express the Bar's brand in the design. The new building provides an opportunity to bring the best aspects of the organization forward. An early focus on addressing elements such as access to natural light, the need for conference rooms, top-notch technology, break-out space, and reduction of redundancies of little-used office items such as printers and fax machines all need to be factored into the layout of a floor plan. It's a laborious but necessary process, Dake says.

"If we can get the Bar's membership to like the place so much that they want to spend more time there, to network and to connect with the legal community, then we've hit a huge home run," Warasila says.

Crafting a Vision

Recently the Washington, D.C., office of Hogan Lovells was nearing the end of its lease, forcing the law firm to face some basic questions about its future: Did it want to renew or relocate? Either way, what type of office environment did the firm want?

A committee of nearly 50 people from the firm—including partners, associates, and service staff—was assembled to create a vision for the future.

A Home Is In the Details

D.C. Bar Building Development Project TeamTake a deeper look into the interviews of the Building Development Project Team referenced in the article. Watch the videos now.

"The lease renewal provided a great opportunity for us to have a discussion about how we wanted to use our real estate," says William Flanagan, a partner at Hogan Lovells and cochair of the committee. "It led to lengthy discussions about how we saw the practice of law, how we engage with each other, and the type of space we wanted to work in."

Hogan Lovells decided to stay put, favoring its current location and Metro access, but the firm also concluded that it wanted a redesigned workspace that was forward-thinking and flexible in the utilization of modern communications technology. After a design competition, Hogan Lovells selected the design firm Gensler to help redesign and build its space.

Working together, Hogan Lovells and Gensler identified the needs for the workspace, including an emphasis on light, technology, informal collaborative spaces, alternative work areas, and reworked office sizes—all guided by the law firm's vision of how the practice of law will evolve.

The plans agreed upon embraced an extensive multiyear project that required ripping out floors, knocking down walls, and beginning anew. "We had to think creatively since we were designing a space that needs to work for multiple generations," says Kim Sullivan, the Gensler workplace strategist on the Hogan Lovells project.

After numerous mockups, Gensler created a "pilot floor" as a test space that employed the elements Hogan Lovells wanted to incorporate into its design.

Ultimately, the project will be completed in 2017, and both Gensler and Hogan Lovells are happy about the discoveries they have made along the way. For companies considering a big jump, Sullivan advises: "Take the time to establish what the vision is and what the goals are. It's not just 'We need a project to come in on time and on budget.' Establish your North Star so that everyone has a point of focus."

Financing: The Art of the Deal

In financing a complex real estate transaction, an organization needs to gauge the potential financial risks and take steps to limit them. "Finance professionals should be involved in the initial planning phase of any large-scale transaction," says Vince Wesley, senior vice president at SunTrust Bank who assisted the Bar with the building project. "At the onset, board members and staff leaders should meet with the organization's bankers, consultants, and legal counsel to determine how it will impact the organization, and how much debt it can reasonably take on."

The Bar explored the impact of the building transaction on Bar operations and the delivery of services by bringing together all of the major stakeholders in the organization, along with finance professionals, real estate experts, and legal counsel. "This strategic approach is important so that everyone understands what the organization plans to do and whether it is capable of doing it," Wesley explains.

The ongoing analysis included a study of equity in hand, balance sheet assets, projected revenue streams, operational costs, and liabilities, in calculating how much debt the Bar could take on without imposing an unacceptable level of risk.

The Bar also examined current market conditions and forecasts to determine the best time to complete the transaction. "Timing is not always appropriate for all organizations and situations," Wesley says. "Currently, interest rates are bouncing around historical lows, but the decision to acquire and finance a large transaction should be based on concepts that define an organization's strategic priorities that align with its stated purpose and mission, coupled with an understanding of the impact on financial resources."

"While the cost of purchasing real estate and developing an eight-story building may seem to carry a big-dollar sticker price," says former Bar president Benitez, "it is also true that leasing carries a big long-term cost. The question is not as simple as 'What does a building cost?' The question we asked was, 'Is it more cost-effective to own or to rent?' We put a lot of study and analysis into answering that question."

Adaptability and Acceptance

The Bar undertook a comprehensive strategic planning process during the past fiscal year. In June 2015 it adopted a new set of priorities and objectives that will serve as the foundation for its new strategic plan, D.C. Bar 2020: A New Five-Year Horizon. Throughout the search for a new headquarters, the Bar leadership relied on the priorities and objectives laid out in D.C. Bar 2020 as a guide.

"Going through the exercise of crafting a strategic plan was of monumental importance in helping us to develop a vision of how our new home should function," says D.C. Bar Chief Operating Officer Victor Velazquez. "The basic research for the strategic plan allowed us to obtain feedback through member surveys, focus groups, and polling. We received over 5,000 comments, and our members were not shy in sharing their thoughts. They gave us a lot to think about."

Bar members expressed a desire for enhanced opportunities to connect, engage, and network with fellow legal professionals. Members also called for enhanced technological capabilities for the Bar to offer more quality content to those located outside of the Washington metropolitan area.

"An interesting statistic," Velazquez says, "is that 40 percent of our members live outside the Washington metropolitan area. Those members are eager to have access to the tremendous content and quality programming that the Bar produces. So our new building will have a video production studio that will allow us to take the intellectual capital of our members here in the Metro area and project it to the 50 states and 83 countries where our members reside."

Stephen I. GloverThe day is rapidly approaching when Bar events and programs will be available to a global audience. "One of the problems that the strategic planning process identified is that the Bar needs to use technology more effectively to communicate with members," says Stephen I. Glover, a member of the Bar's Board of Governors and chair of the Building Advisory Task Force. "One of the great things about the new building project is that it gives us an opportunity to design a space that facilitates that basic need."

For an organization or law firm considering relocation, Velazquez notes that the Bar's strategic planning process was integral to guiding the building project, and he offers this bit of advice:

Start by defining the strategic direction of the organization;

  • Develop sophisticated financial models and sensitivity analyses;
  • Engage experts in multiple fields, including law, finance, architecture, construction, and interior design;
  • Employ assets in a strategic way to maximize stakeholder value;
  • Engage the board in every phase of the project for strategic guidance and approval;
  • Plan for business interruptions and unforeseen situations that will inevitably arise;
  • Partner with longstanding firms;
  • Develop a baseline question-and-answer process as an ongoing review mechanism; and
  • Communicate to stakeholders on a regular, well-scheduled basis.

"Ask yourself, where is the organization going? What are the strategic priorities of the organization? What are the members and clients looking for? That's the starting point for a journey of this magnitude," Velazquez adds.

Moving Forward

The D.C. Bar Board of Governors formed the Building Advisory Task Force to handle any number of issues that could arise over the course of the project. "The building project will take another couple of years to complete," Glover says. "During that time the task force will be on top of whatever happens to be the issue of the moment, whether it's discussions with general contractors, financing issues, or the meshing of construction with design. We'll report to the Board of Governors on a regular basis and make sure everyone is fully informed of what's happening every step of the way."

It is important that all stakeholders remain informed throughout the process. This is especially true in a member organization like the D.C. Bar, Benitez says. "We have more than 100,000 members worldwide . . . I believe that to be a good leader, it is important to lead with a sense of purpose and vision—not only in terms of the present, but for the future."

Benitez adds that it is critical to find out what is best for the members. "We put a lot of study and analysis into answering [this] question," she says. As part of this process, the Bar conducted member surveys and outreach, keeping members informed through the Bar's media channels such as E-Brief, Washington Lawyer, Facebook, and Twitter, as well as on the Bar's Web site. Ultimately, these efforts align with the Bar's strategic priority to "foster community and connections."

In looking back on the progress made over the past 18 months, Webster believes that a key to success has been the transparency of the decision makers. "You have to be open with the Board of Governors," he says. "Members of the Board held numerous meetings to explore and address a myriad of concerns. There were some very intense discussions. But you have to make sure that everyone has the opportunity to ask all the questions that he or she wants to ask, and to make sure that their questions have been fully addressed. Difficult questions deserve honest answers."

Webster believes this transparency bred enthusiasm. "When people see what we're building," he says, "they get excited. They want to know more, they want to see more."

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Looking to Move? 

Learn what you need to consider before relocating. Christopher Zampogna of Zampogna P.C. also offers his moving advice to small firms and solo practices. 

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Have more questions about the D.C. Bar's new home? View our FAQs.


Reach David O'Boyle at doboyle@dcbar.org, Jeffery Leon at jleon@dcbar.org, and Tim Wells at twells@dcbar.org. You can also follow David on Twitter at @d_oboyle and Jeffery at @JLeonDCBar.