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A new industrial development program by Koll Development Co. and Harbert Management Corp. continues the former’s pattern of teaming up with a financial partner to roll out a series of similar projects rather than undertaking individual developments based solely on opportunity. Though the partnership initially entails $120 million of development in various Southeast and Texas markets over the next year, Koll president Tobin Grove says the goal is to extend the relationship indefinitely.

“We see this as the first leg of an expanded program we hope will be in place for several years and go through several iterations,” he tells GlobeSt.com. “Our goals and objectives are clearly aligned with the Harbert guys.”

The team concept adheres closely to a joint venture program Koll established with Prudential Real Estate Services Parsippany, NJ for the Intellicenter office development program. Launched in 2005, the program has invested more than $200 million in projects in Dallas, Houston and Atlanta, with more on the way. “It’s a very efficient way to develop once you get through the initial documentation,” Grove explains. “There’s a lot of benefits to both groups. Deal costs go down both with our partners and our lenders.”

Dallas-based Koll and Harbert, a Birmingham, AL-based investment management firm managing over $20.3 billion of assets and capital, met for more than a year before hammering out the final partnership agreement. Grove says the two companies were brought together through a financing source with which Koll has an on-going relationship. “This is very much a relationship business for us,” he notes. “We always try to build on the connections we already have.” The only serious point of contention, he reports, concerned overall capital structure and how to capitalize projects, but in the end they reached a consensus. The agreement precludes revealing specifics about the chosen method, but he describes the selected capital structure as “fairly traditional.”

The Koll-Harbert team has already tied up its first property, a 50-acre site in southeast Houston on which it plans to develop a 833,000-sf, multi-building complex called Ellington Trade Center. The 513,000-sf, three-building first phase of the $50 million project is slated for delivery in December. Phase II, two buildings totaling 320,000 sf, is scheduled for completion in 2010.

According to Grove, the partners have another site in contract, but he is unable to give details at this time, other than to say it is near a major port. “The bulk of this program is a port-adjacent play,” he explains. “We like ports and bigger box industrial projects. When you marry those up, you’ve got an ideal set-up. We’re searching for sites big enough to accommodate what we want to do, that are well located and have great access for trucks and personnel.” Grove says the partners envision having five projects under way by the end of ’08. “Our hope is to deploy the full $120 million during this calendar year,” he says.

The Koll exec emphasizes the program is solely focused on ground-up development, with the goal of selling projects as they are completed and leased. “It’s designed as a merchant-build program,” he says, “though we’ve designed in the ability to hold if necessary. But the basic aim is to take the projects to market to sell as long as the markets are supportive.”

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