Gross-ups and COVID: Alpha Office Escalations Solves Complicated Calculation Issues

With news of a potential vaccine on the horizon, the thought of returning to “life as normal” seems more possible than ever. However, the pandemic may have changed some of our behavior permanently, specifically impacting how we think about the safety of our work environment. “For the first time in my life, I find myself unconsciously counting to twenty every time I wash my hands, which I now do more often than ever before,” said Bill Brownfield, Counselor of Real Estate (CRE), Certified Commercial Investment Member (CCIM) and co-author of The Escalation Handbook for Office Buildings with Larry Mayerhofer, CPA. “Extrapolate that behavioral change out to include many millions of office employees and you can quickly conclude that some, probably a lot, will want to work in offices that have an office version of the proverbial Good Housekeeping Seal of Approval.” As a result, Brownfield said many office owners and managers are executing new and/or expanded operational protocols designed to improve air quality and safety so tenants will feel comfortable when they return. “Most of their operational adjustments have been implemented by now and are becoming normal daily routines for cleaning, security and social distancing,” Brownfield said. “Some have made capital investments in HVAC upgrades, touchless technologies, UV lighting and other preventive strategies.” In many cases, those operating expenses can be allocated on a pro-rata basis to a property’s tenants, along with their base rent, via escalations. But because leases so often vary, calculating the appropriate share for each tenant accurately can be a challenge. “We know that owners and property staff care deeply about doing the right thing. But the scope of responsibilities for property managers and accountants has expanded so much over the past two decades that they have little time for deep dives. They’re pedaling as fast as they can, so they need new tools to automate and speed up work processes,” said Brownfield. Click to read more at

Pearlstone Partners and ATCO to Present the City of Austin Design Commission a 41-Story Residential High Rise at 84 East Avenue

AUSTIN, Texas—November 23, 2020. Austin-based Pearlstone Partners and New York-based ATCO Properties and Management announced they are presenting plans for a density bonus for their newest multi-family condominium development to the City of Austin Design Commission this evening. Currently referred to as “The East Tower” for permitting purposes, the developers are in the naming process with the formal name to be released at a later date. The East Tower is to be constructed at 84 East Avenue in Austin’s dynamic Rainey Street Historic District. Co-Developers, Pearlstone Partners, a full-service real estate development firm with more than 100 years combined experience in the local real estate industry, and ATCO Properties, the New York-based investment group, are still finalizing many of the details for The East Tower. The firms expect to break ground on the project in the second quarter of 2021, with completion projected for the fourth quarter of 2023. The 41-story condominium tower, situated on 0.41 acres is expected to offer approximately 284 residential homes at an average size of 975 square feet. The East Tower plans for the Design Commission will include the below updates:
• Compliance with Great Streets by fee-in-lieu due to the location and proximity to IH-35 and TXDOT Right-of-Way not allowing for full Great Streets. In addition to paying the fee-in-lieu, the ground level of The East Tower has been moved back to incorporate a more pedestrian-friendly streetscape.
• The streetscape was designed by DWG. and will feature several large planter boxes with full-sized trees and native Texas plants, as well as, a tree-shaded sitting area for passers-by and bike racks. At the northeast corner, planter boxes and a vine cabling system will create an over 100-foot-tall green wall adding life and vibrancy to the area.
• An exterior mural and sign visible via a public access easement will direct visitors and residents from Rainey Street to the public art gallery located adjacent to the rear lobby. Once a neighborhood of sleepy bungalows, the Rainey Street Historic District is now the densest neighborhood in the city in terms of population, offering class-A apartments, high-rise condominiums, and high-end hotels; 25-plus restaurants and food trucks, many of them award-winning; and 20-plus uniquely designed bars—all within a coveted neighborhood that earns a 90+ walkability score. Anticipated common amenities for The East Tower include a rooftop community clubhouse, sky-deck pool, cabana, outdoor kitchen, fireplace, and lounge; a resident fitness center, featuring private spin and yoga studios; a sky dog park, lawn and washing station; a community courtyard and gathering table; and a ground floor co-working space. The rear lobby will likely feature a public art gallery and mural showcasing works by local artists, with direct access to Rainey Street and its many inviting shops, eclectic variety of restaurants and cafes, live music venues, and other entertainment options. Pearlstone Partners and ATCO to Present the City of Austin Design Commission a 41-Story Residential High Rise at 84 East Avenue The East Tower will be less than a mile from the Austin Convention Center, a mile and a half from the
Texas State Capitol, two miles from The University of Texas at Austin, and just steps away from the coveted Ann and Roy Butler Hike-and-Bike Trail, which stretches more than 12 miles around Austin’s venerable Lady Bird Lake. With close proximity to major employers—including Google, Facebook, Atlassian, Parsley Energy, Indeed Tower, Oracle, and many independent start-up firms, as well as to UT Austin and the State Capitol Complex—The East Tower will offer an ideal live-work-play lifestyle. The architect for The East Tower is STG Design, the civil Engineer is Wuest Group, the interior designer is McCray & Co, and AECOM Hunt is providing pre-construction services. The property will be marketed exclusively by Prospect Real Estate.
“Pearlstone Partners is one of the few developers focused on developing an attainable urban housing portfolio,” said Pearlstone Partners CEO and Principal Robert Lee. “We are excited that this project will offer a new price point for buyers who have been priced out of the downtown market with the recently delivered developments. Appealing to an array of buyers including young professionals, empty nesters, first- and second-time home buyers, and anyone else who is attracted to the area’s energy, culture, and urban, walkable lifestyle, the development will feature one- and two-bedroom residences. The East Tower will aim to price the majority of the units from $499,000 to $999,000, which would be the lowest priced new build, downtown high-rise, especially in the highly sought-after Rainey Street District.”

About Pearlstone Partners

Austin-based Pearlstone Partners is a full-service real estate development firm with more than 100 years of combined experience in the local real estate industry. The company has been responsible for more than $200 million in locally developed real estate and has more than $600 million actively invested in a broad range of commercial projects, including office buildings, condos, multi-family and mixed-use projects in some of Austin’s most desirable areas, with an emphasis on urban properties in pedestrian-oriented locations. Pearlstone Partners engages in the economic development of Central Texas by creating high-quality, profitable real estate development projects. With experience managing every stage of the property development life cycle, Pearlstone is uniquely qualified to execute projects from concept through completion. For more information, visit //

About ATCO

ATCO is a closely held real estate investment and ownership platform deploying capital in select cities across the United States, with a particular emphasis on urban properties in pedestrian-oriented locations. For over nine decades, ATCO has owned, managed, and developed a diverse real estate portfolio, primarily in and around New York City, and provided a range of services to other real estate owners. ATCO’s real estate operating company includes investment management, development, marketing, architectural design, and construction management, property management, and commercial and residential brokerage. ATCO’s investment and development portfolio consist of projects in excess of $2.2 billion in gross asset value.

North Texas’ Healthy Industrial Market Stands Out During the Pandemic

Dan Spika, SIOR

Since the start of the pandemic back in March 2020, the economy has suffered millions of lost jobs. Of course, this has had a direct impact on the commercial real estate market. But compared to the office and retail sectors, the industrial market has been much more resilient. In fact, there is some evidence showing that Covid-19 has fueled warehouse demand in Dallas-Fort Worth. We spoke with Dan Spika, SIOR, Executive Vice President and Principal of the Office and Industrial Division for Henry S. Miller Brokerage, to get his take on North Texas’ healthy industrial market. What is your overall perspective on the DFW industrial market since the pandemic started and looking toward the future? The industrial market was in and is still in great shape. Even before the pandemic and the resulting economic downturn, the industrial real estate market in North Texas was booming. Not long ago, The Dallas Morning News reported that some 30 million square feet of new warehouse space is planned around DFW. As a CRE asset, an industrial building is very stable. All indications are that will not change. How has the increase in e-commerce shopping impacted the need for industrial space in the DFW area?
Consumers are finding ways to purchase goods that do not require in-store shopping. One method that was popular before coronavirus and even more so now is e-commerce. People buying online expect to receive their merchandise immediately, which requires retailers to have a so-called ‘last mile’ location for inventory. You only have to look at Amazon’s new distribution center near DFW International Airport that is more than one million square feet to understand the importance of that last mile. What makes DFW the preferred location for warehouse and distribution centers?
First of all, Dallas-Fort Worth is easily accessible to and from any part of the country, including both coasts. Our central location as well as convenient transportation and distribution networks make the region a logistical hot spot. Labor costs here are less than they are on the east and west coast, too. DFW also offers a lower cost of living, great school systems and an overall good quality of life. So right now we’re seeing an influx of many different types of companies, especially from the west coast. What are developers doing vis-à-vis the industrial market? Developers are looking for land! North Tarrant County, Denton, Forney and Terrell are all good locations. South of I-20 is still relevant, too, because land is a bit cheaper there. But it’s difficult to find anything near DFW, Flower Mound, Carrollton or Lewisville. What has been the impact on tenant leasing and rents? Leasing activity has been keeping up with new supply as indicated by a vacancy rate of only four or five percent. And rents are going up as fast as landlords can get to the new sites. And how do investors feel about DFW’s industrial market? They are very bullish on DFW. I haven’t noticed investors being scared off by the pandemic. In fact, I think they’re recognizing the industrial market’s stability, which will likely increase interest for the foreseeable future. Click to read more at

New Construction Office Property Breaks Ground in Lubbock

Construction has begun on a new, class A office building totaling 84,000 square feet at 5107 82nd Street in Lubbock, Texas. The property is being developed by CMS Properties, Inc and the leasing company on the project is Coldwell Banker Commercial Capital Advisors. The previously undeveloped site on the south side of 82nd Street and just west of Slide road will include four floors of office space served by two elevators. The building will offer views overlooking Lakeridge Country Club. The floor plates are approximately 21,000 square feet with suites divisible to 5,000 square feet. Suites will be built out to suit the needs of the tenants. Asking lease rates are $26 per square foot NNN with generous tenant improvement allowances available. “This is a terrific property located on the southwest side of the Lubbock market where there has not been enough supply of class A office space to satisfy tenant demand,” said Jef Conn, CCIM, SIOR and one of the leasing agents on the assignment. “CMS Properties builds top-notch commercial projects throughout Texas and New Mexico. We are pleased to partner with them to market this quality office asset.”