Here’s how Grand2 became the biggest office sale of 2020
A new chapter will begin for a leading tech company at the forefront of innovation and customer satisfaction. When Lincoln Property Company’s Class AA Grand2 office building in Tempe sold in December 2020, it became the largest office sale to close in Arizona that year. Sold for a reported $187 million, the 9-story, 358,000-square-foot Grand2 building will be home to San Francisco-based DoorDash, the leading on-demand food platform.
Grand2, which was completed in late 2019 by Lincoln Property Company (LPC) Desert West in partnership with Goldman Sachs MBD Real Estate, is part of The Grand at Papago Park Center, a master plan that will ultimately total 3.2 million square feet of office, multifamily, hotel, retail and restaurant space. U.S.-based real estate investment management firm Apex Capital Investments Corporation bought the building. DAVIS served as the architect at Grand2 and Whiting-Turner was the general contractor. LPC serves as the developer, leasing agent and property manager for all office space at The Grand, and will continue to serve as property manager for Grand2.
CJ Osbrink, executive managing director for Newmark, who represented LPC in the sale of the Grand2, said Grand2 was a unique deal because DoorDash is an amazing tenant and has grown tremendously due to COVID-19. “They went from a pre-IPO valuation of $13 billion and that became $16 billion in the middle of the pandemic, and in late 2020 announced they’re publicly traded and have a more than $50 billion market cap, so the tenant allowed us to maintain pricing here.”
“DoorDash had a large office presence in Arizona before the pandemic began and they were already conducting a multi-market search to find a larger space to accommodate their ‘next chapter’ of growth,” said David Krumwiede, senior executive vice president, Lincoln Property Company. “They selected Grand2 because it allows them to consolidate their Phoenix footprint into a single building and because it has the layout and amenities that reflect their energetic, forward-thinking culture.” In addition, Krumwiede said the Grand2 was appealing to DoorDash because there’s an opportunity for them to continue to grow into new buildings at The Grand at Papago Park Center.
Krumwiede said the significance of the sale of Grand2 is investors are making a flight to quality and safety. “Their products of choice are industrial, multifamily and high-quality, single-tenant office assets with long-term, credit tenant leases. Grand2 checks those boxes with Class AA amenities and location, and a 15-year triple net lease to DoorDash. The strength of that combination was reflected in Grand2’s ability to attract off-shore money and secure a record-breaking sale price.”
Osbrink said DoorDash putting a footprint at the Grand2 is a testament to how attractive the location is for big tech companies who are looking to migrate into the Phoenix market with close access to freeways, proximity to light rail stops and many retail amenities, and is proof that Papago Park is becoming more of a hub for tech-related tenants like DoorDash.
“This sale further shows that the sustainability of the Arizona, and specifically the Phoenix economy for companies that are looking to go into a business-friendly, tax-friendly and infrastructure-friendly environment versus some of the other gateway markets,” Osbrink said.
“Quick access to freeways, light rail and an international airport eases the burden on corporate visitors and serves commuting employees in ways that will help DoorDash attract and retain the best talent,” Krumwiede said. “As an example, Grand2’s two on-site Light Rail stops and its two nearby freeway interchanges will cut employee commute times by more than 30 minutes compared to some of the increasingly congested projects on the south side of the Lake. From an exposure standpoint, Grand2 also gives DoorDash an amazing, Loop 202-facing building signage position that is visible to more than 185,000 cars per day.”
Grand2 features innovative amenities designed for functionality and comfort for DoorDash employees including a 13,000-square-foot lobby and amenity lounge with a TV viewing area, collaborative spaces, conference facilities and an on-site, state-of-the-art fitness facility with Peloton and Mirror equipment. The LEED Silver and Energy Star building also has a 13,000-square-foot rooftop deck with seating, catering capabilities and views of Papago Buttes and Camelback Mountain.
“As much as building amenities add innovation to a project, their real power is in how they serve the people who use the building on a daily basis,” Krumwiede said. “When you add a lobby with comfortable seating, fitness center or a rooftop deck where an employee can enjoy their lunch with a view, you’re creating a place where someone wants to work. More and more employers are realizing that buildings like these offer a tremendous recruiting and retention advantage. That is where innovation comes full circle with bottom-line business success.”
Grand2 was highly competitive during its leasing phase, Krumwiede said its sale listing attracted strong, global buyer interest. “As a vaccine is introduced and our economy re-emerges in the coming months, all indicators point to the appetite for this type of product to continue, or even increase. We already have our next office building underway and look forward to announcing more on that project in early 2021.”