OPPORTUNITY/CHALLENGE

In 2001, KDC was presented with the opportunity to develop a Build to Suit facility for Blue Cross Blue Shield of Texas (BCBS). By the spring of 2002, KDC was awarded the opportunity to build a 650,000 SF consolidated campus for BCBS. However, over the next year, BCBS was not able to win board approval for the project and the deal was put on the shelf. Meantime, BCBS renewed and extended its existing 535,000 SF lease for 15 years. Three years later, in 2005, KDC and BCBS resumed talks for a BTS, but by then BCBS had signed a long-term lease on 535,000 SF which impeded development negotiations.

SOLUTION

KDC was hired to develop a new campus totaling 1.1 MM SF on 35 acres. To solve the problem of BCBS’s remaining lease term, KDC structured a unique and creative solution, whereby KDC agreed to assume BCBS’s current lease obligation once the new building was completed. This resulted in KDC assuming approximately 11 years of lease term from BCBS.

RESULT

KDC completed the construction of BCBS’s new office facility, 1.1 MM SF and another 1 MM SF of parking structure, in a 22 month period. BCBS moved into the new facility in March, 2010 almost 10 years after KDC and BCBS’s first discussions.

In March, 2010, KDC took control of BCBS’s old facility located at 901 Central in Richardson, Texas. Though the building had been kept in pristine condition, it had never been part of the market of available space in Richardson. It had been the BCBS Headquarters since 1980.

Twelve months later, KDC signed a 10-year lease with Fossil, Inc. for the entire 901 project. As part of the agreement with Fossil, KDC agreed to purchase the buildings it was vacating - three properties totaling 470,000 SF.