Philips Healthcare – The Offices at Pinecrest
Philips Healthcare, a global healthcare industry leader, was looking to relocate its regional headquarters and research and development (R&D) team from its 40+ acre Highland Heights headquarters, which it has owned for decades. The assignment was made more challenging by the seemingly impossible deadline of 6 months from engagement to lease execution.
Philips had a lengthy list of demanding requirements for space in a challenging real estate market and more than a dozen international stakeholders. Because this requirement included a highly sophisticated and specialized R&D component with the development and testing of computerized tomography (CT) scanning equipment, Philips had detailed HVAC floor-load, sound/radiation insulation and electrical specifications. This complexity was evidenced by a 15-page technical spec sheet detailing these requirements at the outset of the request for proposal (RFP) process.
The technical requirements, however, were only one component of this project. As importantly, Philips required a high-image, corporate environment which would allow it to attract and retain top talent from across the globe. Among its many goals, Philips desired to create a showcase example of its new brand and image as a worldwide leader and innovator in medical technology.
The Cushman & Wakefield/CRESCO Real Estate team of Bill Saltzman and Eric Schreibman were engaged to lead and coordinate this project on behalf of Philips. The assignment evolved throughout a fluid process of exploration, investigation and analysis. Stakeholders included the Cleveland-based management team, corporate finance, the architecture and engineering team, human resources, and Philips’ executive leadership team in the Netherlands.
With so many active participants from the Philips team, it was essential for Eric and Bill to identify and explore a wide array of options within a relatively narrow geographic area, ranging from upscale flex buildings to elite office and mixed-use environments. To make matters more challenging, market conditions did not provide a deep pool of options that offered sufficient square footage of high-quality space, as well as a dense ratio of required parking, and the substantial heating, cooling and power requirements for the R&D function – all within a first-class environment.
In furtherance of Philips’ goals, Bill and Eric orchestrated a rigorous qualification process to establish realistic expectations, while defining and refining its requirements. Due to the tight timeline, Bill and Eric immediately began to narrow the list of options in collaboration with a large contingency of Philips decision-makers. The team worked tirelessly to develop and enhance the requisite trust, lines of communication and collaboration critical to ensure the success of the project.
As the corporate vision became better defined, Saltzman and Schreibman probed the numerous stakeholders to test changing assumptions and verify shifting expectations. In this role as trusted advisors, Saltzman and Schreibman had to anticipate solutions to pressing questions, listen carefully for answers, and then nimbly interpret, pivot, and readjust their recommendations.
Managing the multi-level communications to a wide audience over a six-month period while maintaining confidentiality required skill and sound judgement. Communicating the right message to the right audience at the right time was not a simple task but was essential in our efforts to assist Philips in accomplishing its goals.
THE TRANSACTION PROCESS
Once a shortlist of options was decided upon, Bill and Eric created a detailed RFP document to provide Philips with an apples-to-apples comparison of multiple property alternatives. As tenant advisers, they negotiated terms and conditions simultaneously with multiple property representatives while working to advance fit plans, confirm technical qualifications, refine construction budgets and develop comparative financial models.
By virtue of the RFP vetting process, Philips selected Pinecrest, Cleveland’s newest and most dynamic mixed-use project, for its regional corporate home. Located adjacent to the high-profile interchange of I-271 and Harvard Road in Orange Village, Pinecrest offers Class A office space with premier branding, regional recognition, as well as a wide array of stellar restaurants, an upscale Marriott hotel, brand new residential facilities and other lifestyle amenities which were extremely attractive to the Philips workforce.
Due to the complex nature of a mixed-use project, additional concerns about operational allocations generated the need for specialized analysis and creative solutions to protect the interests of Philips. For example, real property tax considerations, granular attention to detail with respect to parking rights and allocation of property expenses between the various use classes at Pinecrest required a deeper understanding of how these issues might impact Philips’ occupancy at the property.
In another key win, the team negotiated for Philips the only top-of-building facade signage at The Offices at Pinecrest. This premium branding will serve to enhance the corporate identity of Philips, and is visible to over 150,000 vehicles per day on I-271.
A creative brainstorm turned the Pinecrest dream into a reality, when Bill and Eric recognized the unique opportunity at one of the two Pinecrest office towers. Due to the topographic advantage of having an entrance on grade at the second floor that was separate and apart from the main entrance to the building, Philips would have the opportunity to install, service and replace the specialized, heavy CT equipment with direct access into the building at an access point away from the primary entrance. This design quirk turned into a rare advantage which played to Philips’ needs.
All of these complicated negotiations were compressed into a tight time frame to enable finalization and execution of a complex lease document in September 2018. This enabled a smooth transition to the construction team which delivered the world-class, showcase workplace environment Philips was seeking — on time and within budget.
Philips Healthcare had a seemingly impossible deadline, a lengthy list of stringent requirements in a geographically limited market, and a large and diverse group of stakeholders… and the stakes were high; the goal was a world-class HQ and R&D facility that would serve as a showcase within the Philips portfolio. Through diligent effort and collaboration, Bill Saltzman & Eric Schreibman built an exceptional level of trust with Philips to achieve the goal at The Offices at Pinecrest.
To learn more about how CRESCO, Greater Cleveland’s leading commercial real estate company, can help you with your property needs, contact us at 216.520.1200, or fill out the form below. A CRESCO professional will contact you shortly.