Devon Energy Center

[jbrown84]

The text on P-C's site answers a couple of the FAQ's.

Devon World Headquarters
Oklahoma City, Oklahoma
1.9 million gsf
Client: Devon Energy
Architect of Record: Kendall/Heaton Associates
Status: Schematic Design

Located in downtown Oklahoma City, Devon’s new world headquarters will create a new focal point for the company and the city by integrating civic-scaled spaces as a vital component of the development. The 1.9 million gsf corporate headquarters will consolidate the company’s Oklahoma City–based workforce into a single state-of-the-art facility and will be supported by numerous on-site employee amenities. The creation of a significant, beautifully landscaped park and plazas is a key element of the overall site strategy.

Rising 925 feet, the fifty-four floor office tower’s unique three-sided footprint allows it to be viewed from all of greater Oklahoma City. Each of the main faces is divided into two subtle facets and its triangular form is further articulated by a vertical feature wall recessed between each of the main faces. Typical office floorplates range from 25,000 to 28,000 gsf and have a clear ceiling height of ten feet and raised-access floors.

The tower’s curtain wall is composed of state-of-the-art continuous floor-to-ceiling glazing and a highly articulated mullion system. The uppermost portion of the tower tapers slightly to enhance its proportions and to produce an elegant, soaring form in the skyline. The three facades are chamfered to create a triangular form to reflect the sky and offer a subtly changing presence on the skyline. Illumination strategies respectfully enhance the drama of the tower on the nighttime skyline.

The focal point at the base of the tower is a six-story cylindrical glass rotunda which serves as the primary entrance and as a connecting hub for the entire complex. With a highly articulated structure, the rotunda will be a grand dramatic civic-scale space with glass walls, a series of balconies and skylit roof. It may also serve as venue for special events.

Creating a backdrop for the new park, a six-story podium contains 400,000 gsf for workspaces and employee amenities. A promenade extending the length of the podium creates a glazed interior corridor. At street level, the promenade provides access to various amenities, including several restaurants, and creates a series of intimate-scale indoor seating areas for dining and gathering overlooking the park.

A simple yet elegant 2 ¼ acre park and plaza acts as the foreground for the complex. At its base, the tower will be highly transparent and will allow pedestrians to view into the lobby as it appears to float in the reflecting pool that is bridged by the entry plaza. A cascading wall of water enhances the entry experience, projects the building’s geometry into the landscape, and buffers the park from the activity of the plaza and street.

A number of sustainable systems and technologies are currently being considered for the Devon project. The project has been registered with the U.S. Green Building Council’s Leadership in Environmental and Energy Design (LEED) program with the intent to achieve LEED certification.

[southernskye]

The project has been registered with the U.S. Green Building Council’s Leadership in Environmental and Energy Design (LEED) program with the intent to achieve LEED certification.

Thank you for answering my question. I was hoping it would be.

[BDP]

Any guesses on the low point of oil price that derails this project? $80/barrel maybe?

$80? Do you think that's low? They will still be making tons of cash at $80 and probably enough in profit to pay for the building in a few quarters. So, yeah, $80 a barrel may double the time it takes for them make enough money to pay for it... from 3 months to 6 months.

Until there is a viable alternative fuel source I don't think oil will ever see $25.

$25 is like 9/11 prices.

I doubt you will see it that low again either.

[Luke]

The more people who go hybrid, electric, green and conserve... the better it is for people like me who will be using fossil fuels for the forseeable future. Hopefully as the oil industry has more competition, the price will continue to go down even more.

[HOT ROD]

I hope they get LEED-Platinum, if so - the skyscraper will make OKC into a destination for urban design!

Nevertheless, I am still at awe over this skyscraper and even have pics of it up around my house and office. It is simply BEAUTIFUL!!! and will change Oklahoma City like no other building has. It will give visitors and people 'forced' to go to OKC some visual candy in somewhat a similar effect that our geography here in Seattle gives visitors on their approach to Downtown Seattle.

It will make OKC look like a city/metro of 1.3M that is alive and well. That is what we need to show/see on Thunder games too,.

[southernskye]

I hope they get LEED-Platinum, if so - the skyscraper will make OKC into a destination for urban design!

Nevertheless, I am still at awe over this skyscraper and even have pics of it up around my house and office. It is simply BEAUTIFUL!!! and will change Oklahoma City like no other building has. It will give visitors and people 'forced' to go to OKC some visual candy in somewhat a similar effect that our geography here in Seattle gives visitors on their approach to Downtown Seattle.

It will make OKC look like a city/metro of 1.3M that is alive and well. That is what we need to show/see on Thunder games too,.

OT: I miss living in Seattle. It was a major culture shock moving here.

[OU Adonis]

OT: I miss living in Seattle. It was a major culture shock moving here.

Well different strokes for different folks. I did not like living in Seattle and thats why I moved back.

[okcpulse]

OT: I miss living in Seattle. It was a major culture shock moving here.

No to be sarcastic, but to me, moving to a different part of the country isn't culture shock. It's an adjustment, or a cultural adjustment. Moving to Mongolia? Now THERE'S some shock. If we're going to discuss culture shock, let's get serious!

[southernskye]

No to be sarcastic, but to me, moving to a different part of the country isn't culture shock. It's an adjustment, or a cultural adjustment. Moving to Mongolia? Now THERE'S some shock. If we're going to discuss culture shock, let's get serious!

LOL, OK , MAJOR adjustment.

[metro]

I guess the JR forgot to read it's own articles. As we know, this project is closer to a billion now.


Oklahoma’s HQ Curse
Journal Record
October 10, 2008

TULSA – Can Devon Energy escape Oklahoma’s headquarters curse? As the Oklahoma City-based energy giant advances toward its $350 million construction project, it crosses swords with one disturbing trend in this state’s office market.

Over the last quarter century, few if any Oklahoma companies have successfully completed a significant headquarters project without flirting with bankruptcy or being sold. Often their signature structures also undergo significant cost cuts before completion.

Part of that reflects simple economics. Due to soaring construction inflation and the lack of strong market demand, few firms have even tried to build a high-rise office structure in Oklahoma over the last few decades.

But another side of that trend reflects the all-too-human desire to make a statement through the structure, which can inflate the project well beyond the needs.

“Sometimes I think it is an overly optimistic view of the future,” said Terry Argue, president of downtown’s Coldwell Banker Commercial Argue Properties and a past president of the Tulsa Building Owners and Managers Association. “Tenants have the ability to expand and contract and be flexible, even if they become an enormous company.

Once you build your legacy headquarters building, so to speak, you typically build it much larger than you need.” If anyone can break this historic “curse,” most analysts think it will be Devon. But the challenges loom large.

Disqualifying Utica Place due to the 10-story, $30 million tower’s large portion of residential space, One Technology Center represents the first and last major office building raised in Oklahoma since the 1980s oil bust. Built to house the Williams Communications headquarters, that 15-story glass cathedral to all things high-tech opened in 2001 just in time to see its parent company slide into bankruptcy and takeover.

While a few companies like QuikTrip or Chesapeake Energy succeeded with elegant, spreading headquarters complexes, those that plotted legacy skyscrapers like the 54-story glass prism Devon has proposed usually paid a heavy price – best illustrated by the failed Penn Square Bank’s gift of The Tower to Oklahoma City, or bankrupt Reading & Bates blessing Tulsa with what became Mid-Continent Tower.

Offices do not bear these harsh construction realities alone. Over the last 15 years rising costs forced both Oklahoma City and Tulsa leaders to endure several painful project reductions while finishing the Ford and BOK centers.

Oral Roberts University struggled to complete its 60-story City of Faith hospital complex, selling the structure within a decade as the hospital it housed failed to meet expectations.

But high-rise offices draw the greatest public attention because of the iconic role a skyline plays for a city and its cultural self-image.

Historic woes

Some analysts think Devon may escape the headquarters curse due to its different economic setting. A significant cause of the 1980s brutal energy collapse drew from rampant indulgence in expensive deep-gas drilling projects and Penn Square’s vast overselling of such loans. “I don’t think we’ve gotten out of whack with over-enthusiasm and overinvestment as we did back then,” said Robert Dauffenbach, associate dean for research and graduate programs at the University of Oklahoma Price School of Business in Norman.

But oil futures played an equally significant role in Oklahoma’s recession that decade, dropping below $10 a barrel not once but twice. That came after two decades where oil analysts speculated crude prices could be headed toward $50 to $100 a barrel or higher, dramatically influencing business decisions by not just oil executives but lenders, real estate leaders and agricultural professionals – many of whom paid the price.

Those factors led several office developers to downsize or eliminate projects, including Oklahoma City’s trimmed Leadership Square, lowered plans for Warren Place and dropped projects with what in Tulsa is now known as Mapco Plaza.

Those factors also created the lingering shadow that dogged office development through today – as energy perceptions again mirror those of the optimistic 1970s.

Over the last five years, oil analysts again have sounded the alarm that supplies are nearing an end, even as promises of ever-rising worldwide demand spurred futures prices to top one milestone after another. Those factors led the nation’s energy industry to invest billions in new refineries, pipelines and other infrastructure, all based on the assumption that general demand for oil and natural gas will only grow. That mood continues even in the face of oil futures changing course this summer, falling from $145 to $86 a barrel.

This came just a little over a year after natural gas prices sank so low, some producers debated bottling their supplies in the ground to wait for better days.

With many pipelines coming online over the next few years to deliver new Rocky Mountain and Canadian supplies to market, even as more new and enhanced refineries begin to pump out more gasoline, some analysts question whether Americans may see even greater commodity price volatility.

Since construction inflation spikes heavily tax corporate cash flow levels that, with firms like Devon, are heavily dependent on commodity prices, such volatility threatens to play havoc with large building projects.

But just as Devon successfully navigated through the ‘80s oil bust, emerging through the 1990s as a national leader, spokesman Chip Minty said the company has the resources to ride out today’s price fluctuations. “We have a good deal of cash on hand that is allowing us to fund our capital projects, plus we have a strong revenue stream as well,” he said. “That’s not a concern of ours. We also continue to grow our production on an annual basis.”

Devon just set its ninth consecutive quarter of growing production through drill bit, he said. “We expect to continue that growth trend through the rest of this decade and beyond,” said Minty.

With more than 40,000 undrilled locations in its portfolio, Minty said Devon may counter any dramatic price drop by ramping up production. “We go by a business plan that accommodates volatility,” he said, noting the company did quite well with oil prices below $100 a barrel.

“The fact that the commodity market’s volatile right now does not bring undue concerns.”

Positive factors

Devon may have an ally in one construction element. “We’ve endured double-digit increases in construction costs for the last four years,” said architect Rachel Zabrowski, studio director for Miles Associates Tulsa, “but now construction costs are apparently going down.”

But another factor shaping today’s construction industry may be more unforgiving. The credit crunch and financial industry shakeout has undercut lender support for even the strongest firms – and not just in the office market, but retail and industrial, said Robert Pielsticker, a vice president and industrial specialist with CB Richard Ellis of Oklahoma.“If you’re not already out of the ground and you’re not 100-percent pre-leased, it’s not going to happen,” said GBR Properties broker Bob Parker, speaking from the retail viewpoint.

While Devon has not said how it will fund its project, Minty said the company may not use any outside lenders. “We’re in position to pay for this building over the four-year life of the project,” he said. “They have ultimate control,” said M. Jake Dollarhide, chief executive of Longbow Asset Management of Tulsa, who considers Devon one of Oklahoma’s strongest companies. “They’re one of the few companies headquartered here that’s part of the S&P 500. Frankly, with the acquisitions they made in the ‘90s, they’re one of the largest E&P firms.

They have a pretty powerful one-two punch in onshore and offshore drilling, and they have international stakes. If you name a shell, they’re in the shell.” The basic truth breaks down to this: Even at $400 million or more, the construction project may not present a major burden to a company generated $1.32 billion in free cash flow from operations, minus capital expenditures, just in the first six months of this year, said James Carnett, senior portfolio manager with Fredric E. Russell Investment Management Co. of Tulsa.

While that did reflect surging oil prices, Carnett said projected 2008 total production of 240 million barrels of oil equivalent should still deliver strong, if reduced, cash flow rates going forward.

“Devon has $5.4 billion in debt versus $23.4 billion in stockholder equity, so their debt to total capitalization ratio is a conservative 19 percent,” he said. “Adding $750 million in debt with their balance sheet should not be a problem.”

Future benefits

From a real estate standpoint, Devon’s proposal still stretches the basic economics of Oklahoma’s office market. Argue, whose firm manages Mid-Continent Tower, said the Devon project cost comes in at about $400 per square foot. If the company were to rent the space, Argue said Devon would need to charge $35 to $40 per square foot just to break even.“That’s three times the current rate,” he said. “In our market, our rental rates have not kept pace with the cost of building a new building.”But from an ownership standpoint, building the tower will allow Devon to gather all their 1,500 Oklahoma City employees to one location, rather than spread them out in the five buildings they occupy now.

Minty said it also would accommodate projected growth to 2,000-plus workers before its completion.“There are significant advantages in production when you have space designs that allows employees to be in contiguous space,” said Argue. “And in terms of the overall cost of running a large business, the cost of real estate is not a significant factor.”

Having seen aggressive, optimistic companies crash and burn building similar projects, Argue understands the concerns of real estate observers watching Devon’s project advance. But he also sees opportunity, since many of Oklahoma’s construction booms started with someone like Devon willing to take the risk, which reset Class A expectations and drew competitors.

“We’ve missed out on about 25 years of changes and enhancements,” Argue said of construction and architecture advances. While longtime Tulsa office market analyst Ken Tooman does not expect the Devon project to jump-start a new wave of construction, he agreed it could set a new standard for Class A space.

“It may initially have a negative impact on the market,” said Argue, since it will free up Devon’s existing office space. “But that softness may be offset by existing companies, and possibly of a new company moving to Oklahoma City to be close to a Devon that’s growing.”

The national exposure Argue expects Devon to attract with this project will enhance the spotlight downtown Oklahoma City will gain from its new NBA franchise and other events – and that could reverse the headquarters curse, perhaps even spreading to Tulsa’s still-healthy economy as the BOK Center and other projects gain momentum.“The whole deal with a building like that, it’s just exciting,” he said.

[Pete]

That's an excellent article -- thanks for posting it.

I'm sure the economy will soon stabilize and that oil & gas will start going up again. I suspect it will be back to near it's all-time high within a year. The world still runs on oil and demand continues to grow steadily.


Anybody heard if Devon is close to buying the property for their complex? I would think this would be one of the first steps while they work on all the engineering. Also, I wonder what type of stipulations might be included about Devon building by a certain date and/or perhaps returning the property to OCURA if that doesn't happen.

[HOT ROD]

they already bought the Colcord hotel.

I consider that to be the first step in moving forward, wouldn't you?

[OKC74]

With the news of Chesapeake today...is anyone worried that the Devon project may have to be put off by a few months or years? I HOPE NOT!!!

[Pete]

they already bought the Colcord hotel.

That was before all the financial turmoil and drastic drop in gas prices.

I'm just looking for positive signs as to their intentions since.

[OKC74]

Pete (or anyone else that may remember) - Hasn't it been discussed on this thread before that Devon is more involved with natural gas and other types of energy and a little LESS in oil...so that MAYBE they aren't affected as badly by all of this economic mess? I'm just trying to get an understanding of all of this, and where Devon is, and what this could mean for any possible change in plans for their new tower. Do you think that Nichols sees this new building as a priority that he MUST have because of the growing employee base, no matter what the economy is doing? Don't they have the cash on hand to build this thing, or do you think that these rough economic times will put a wrench in this whole project?

[Pete]

I believe Devon is weighted about equally between oil & gas. Both commodities tend to track very similarly, although gas is affected much more by weather patterns (particularly cold winters).

I'm not too worried about Devon as a company because Nichols is very conservative in his approach. I'm really not even worried about the building in the longer term, just maybe some short-term delays until things settle down a bit.

I think the economy will stabilize after the first of the year and I'd expect oil & gas prices to start edging up soon, and be pretty strong by next summer.

[HOT ROD]

Pete, I agree!

[blangtang]

pipe dream, anyone echo sentiments?

We're lucky we had the $$ when we did; crap like POPS and the rowing stuff is dividends that were there in the past. What do we have going forward, eh?

I'd bet against the Devil Tower being constucted.

hope it happens, but i'm in a wait and see mode.

Cheers!

[hoya]

Drastic drop in gas prices? I think our perspective may be a little skewed.

Remember that $80 a barrel is incredibly high historically. It's just much lower than it was a few months ago when it was sitting at outrageously high prices near $150 a barrel. That price level was never sustainable, and any reasonable person knew a crash was coming. I don't think Devon's plans for a new headquarters were based on $150/barrel oil.

Now, if prices continue to crash, there might be some readjustment. I've heard a few analysts predict $50/barrel as the low end. At that level, Devon will still be making quite a bit of money, but maybe not enough that they're itching to build a new skyscraper. Of course, the good news for Devon is that construction costs are going to fall as well. With the global economy crashing, new construction is going to grind to a halt. Now is the time to build, if you've got the cash on hand and don't need a loan.

[Thunder]

Devon needs to act now, move quickly. Whoever is going to be constructing the skyscrapers will definately be wanting to do it as long Devon got the cash to hand it over.

[Insider]

Unfortunately, I will be EXTREMELY surprised if the Devon Tower gets built at the current schedule. It is true that Devon has tons of cash on hand, but I do not think they will want to spend it right now given the current state of the economy. I think they will make a wise business decision and hold onto the money for a while 'just in case' something goes wrong. I think we will see a press release soon stating "we have encountered some delays that have caused us to push back the start of construction by six to twelve months." I hate to say this, but I just do not think that they will spend a large chunk of their cash reserve to build this building right now when the building is not absolutely needed at this time. It will get built, I just think it will be delayed.

[stickboy]

I think it will be built on time. The sky is not falling. Devon is a financially secure company, it is not operated like Chesapeake. The fact of the matter is Devon needs to be in one building, so they are going to make it happen.

[Thunder]

Well, I'm seeing 600+ points increase today for the market.

[Pete]

Today their stock was back up to where it was just over a year ago. Still well off the all-time high, but plenty strong.

I'm sure they are moving forward with all the engineering plans and they aren't even slated to break ground for another year. By then, things should look even better than they do now. I'm not too worried.

[Luke]

+760