Chesapeake empire marches on

[Drake]

192nd & May was sold to Shaz Investments LLC. So who is Jalal Farzeneh?

One of the brothers that own Home Creations builders

Oops: Sorry missed the reply that this had been answered

[OklahomaNick]

Gosh, I wonder who the broker was who allowed CHK to pay such an inflated price for these buildings?
Would they not negotiate anonymously?

[Pete]

CHK set up a bunch of LLC's but everyone knew when they were the ones looking to make a purchase.

But long before they drove the prices up in the area, they paid way, way over the mark as a policy.

And even after prices went up, they still paid way over market.

[OKCTalker]

There were two buyers in those days: Chesapeake, and sleazy people trying to buy your property so they could flip it to Chesapeake.

[OklahomaNick]

Well I guess if you were one of those stubborn people that did not sell to CHK, for the purposes of holding out for more money then I think you missed your opportunity to get way above market value

[Pete]

Well I guess if you were one of those stubborn people that did not sell to CHK, for the purposes of holding out for more money then I think you missed your opportunity to get way above market value

MidFirst is the best example of this.

[onthestrip]

MidFirst is the best example of this.

Ya but its no big deal for Midfirst if they missed out. But as said above its funny to hear about the smaller guy who always thinks there is going to be bigger money around the corner and then ends up with none of it.

[OKCisOK4me]

Looking at the new 45 degree angle maps on Google, what is the circular structure that is being built east of Lee Avenue between 57th & 59th Streets?

[Pete]

Looking at the new 45 degree angle maps on Google, what is the circular structure that is being built east of Lee Avenue between 57th & 59th Streets?

It will be a large pond.

Long term plans call for another large semi-circular office building on the north shore.

Athletic fields to be to the immediate west.

[OKCTalker]

MidFirst is the best example of this.

I thought the poster child was the veterinarian. They made CHK so mad that they built around him, made him perform to the end of his lease, and then bulldozed the strip center.

[OKCisOK4me]

Oh, and look, a nice outdoor amphitheater! Who on Earth would use that?? I can see the circular lake being there for a 'beauty on campus' look and athletic fields for employee health but an amphitheater? Okie dokie!

PS...looks like there's going to be a traffic circle in the works too. At least someone in this city is building a new traffic circle!

[ChargerAg]

Anybody want to lay odds on if they ever build anymore of that plan then what is already constructed?


the amplitheater seems like it would be a weird place to watch something with a large building on one side of the stage and grass on the other.

[Steve]

My biggest concern about what CHK is doing is that this all comes when their business is going gangbusters. And if history has taught us anything, it's that these rides don't last forever.

What happens if their earnings drop sharply or they are acquired? Then, we'd have tons of things cleared out and nobody to rebuild.

I'm sure they have very grand plans but I'd feel much better if they'd start putting some things up other than structures for their exclusive use. Otherwise, we may have a mini Pei Plan on our hands.

Hmmmm....... February, 2008. Five years ago.

[Pete]

Yep, and although they have rebuilt some (Classen Curve and Whole Foods) there are still big empty lots in place of the two Glenbrook Centre buildings, the Kensington Apartments, the Kings Court condos and dozens of other businesses.

Amazing they just tore down Glenbrook Centre West just as they were selling off the Caliber Center and the Harvey Parkway buildings. They paid about $8 million for that building then demolished it; the underlying land is worth much, much less without the improvements.

I still keep a huge series of spreadsheets on all their transactions and they stand to lose a ton of money over what they originally spent. In almost all cases, they have paid $1 - $2 million per acre and no one is going to offer that sort of money when all this comes back on the market. They took massive losses on the two office buildings they just sold after only holding each about a year.

[HangryHippo]

Yep, and although they have rebuilt some (Classen Curve and Whole Foods) there are still big empty lots in place of the two Glenbrook Centre buildings, the Kensington Apartments, the Kings Court condos and dozens of other businesses.

Amazing they just torn down Glenbrook Centre West just as they were selling off the Caliber Center and the Harvey Parkway buildings. They paid about $8 million for that building then tore it down; the underlying land is worth much, much less without the improvements.

I still keep a huge series of spreadsheets on all their transactions and they stand to lose a ton of money over what they originally spent. In almost all cases, they have paid $1 - $2 million per acre and no one is going to offer that sort of money when all this comes back on the market. They took massive losses on the two office buildings they just sold after only holding each about a year.

Just absolute stupidity on their part to do all of this.

[Pete]

Just this last December -- with the new Board and Chairman breathing down Aubrey's neck -- CHK paid almost $3 million for just under an acre in the I-44/Grand/Western triangle. Just in that area alone, they have spent more than $21 million for a bunch of buildings that are either empty or will be ultimately torn down.

They also bought more property in the condos surrounding NH Plaza and at 50th & Penn in the last few months... All at outrageous prices.

And all the while, they were needing to raise billions just to make cash flow.


I bet once Aubrey is completely out and some time passes, someone will write a book about the crazy excesses of that company.

[HangryHippo]

Hasn't this all stopped now though with Aubrey on the way out and CHK having to seriously reign in expenses?

[Pete]

There hasn't been any new purchases for the last couple of months.

[OKCTalker]

I bet once Aubrey is completely out and some time passes, someone will write a book about the crazy excesses of that company.

Mark Singer's "Funny Money" (Penn Square Bank) comes to mind, as does Bethany McLean's "The Smartest Guys In The Room" (Enron). There will certainly be a book about this, and I'd like to see a collaboration by local guys Pete (database and real estate experience) and Steve (journalism and publishing experience). But reporters from Reuters and the WSJ could give you guys a run for your money.

[Pete]

Steve has an article coming out this Sunday and received some input from me.

However, there is still much we don't know.

Without someone on the inside, we'll never know what kind of deals they struck with Whole Foods and all the CC tenants but it's common knowledge they gave them massive incentives; Aubrey even bought into Balliet's in order to get them to move.

What we do know seems to be the tip of the iceberg.

[HangryHippo]

Are things about to get a lot worse? I thought things were improving with CHK...

[Pete]

I think things are getting much better there, I just meant with all the real estate stuff that's already taken place, we can only see some of the details.

And I think that's true for their spending under Aubrey in general.

Now that he's out of the picture, I'm sure they are much, much more responsible.

[OKCTalker]

OnlyOne - CHK needs to focus on their core business which is nat gas exploration (and increasingly oil). As repeatedly shown by Pete, this has been a very expensive and costly distraction on the part of Chesapeake Land, and it would be wise for them to sell the non-core real estate - even at a loss - and move on.

And there might not be a better time than now. Interest and CAP rates are low, lenders are loosening the purse strings, OKC has a stable economy and our real estate market is cheap compared with most others. I can see institutional investors buying up a portfolio of their office properties, but it will be smaller investors who take the retail (CC & Triangle). Buyers for the Nichols Hills retail, Christian Science Church and multi-family residential will most likely be local investors with NH connections. Unless Aubrey leaves CHK with a controlling interest in Chesapeake Land, all of this is doable. But if he retains an interest in Land he'll need investors, and I know of no one who would go into a partnership with him right now.

[Pete]

A good deal of what is owned by CHK is not controlled by Chesapeake Land Company, as they started buying and shifting ownership to a myriad of other LLC's.

But regardless, I doubt very seriously Aubrey will retain any ownership in the CHK real estate. I think it is all owned by Chesapeake or one of their direct subsidiaries.

You can also bet it's been leveraged to the hilt, just like everything else Chesapeake and Aubrey owns. I would also wager that they will not only take big losses when they sell (has already happened with two office buildings) but they will not even be able to cover the associated debt.

Still, they can get a good chunk of debt off their books by liquidating and that's clearly what they plan to do, at least with the out-lying office buildings. NH Plaza, Classen Curve and the hundreds of commercial parcels they own near but not on their campus will be much more interesting to watch.

For example, what will happen to the church they paid $10 million (!) for? What about the empty lots (Glenbrook, Kensington Apartments, Kings Court Condos, etc.) where they paid tens of millions but now only have land? They still own 18 of 23 condos at Grandmark, to the tune of almost $8 million. Same is true about the Sherwood Arm Condos, where they own all but two and way, way overpaid.

Selling the office buildings should be pretty straight forward, as there is high demand and generally speaking they've spent a ton improving them (like Atrium Towers). It's all the other retail and commercial properties that will be much harder to sell, especially for anywhere near the $1 to $2 million an acre they've paid for them on average.

[ljbab728]

Here is the new article by Brianna and Steve.

http://www.oklahoman.com/plan-for-ar...rticle/3764318

Chesapeake’s plans for the area around its campus included company-owned shopping centers, a hotel, high-end condominiums and a chain of modern convenience stores dubbed “Peake” that would feature pumps with compressed natural gas.

That vision, far from complete, would have complemented a corporate headquarters that features such amenities as a 2.5-acre community garden, a 72,000-square-foot fitness center and a $10 million, 63,000-square-foot employee child care center topped with a steel-tube sculpture spelling the word “Hi.”

Although Chesapeake has said it is slashing costs and selling billions of dollars in assets in the face of a bearish natural gas market and a board shake-up, the company has remained mum about its plans for the hundreds of millions of dollars of real estate it owns in Oklahoma City or for several development projects in various stages of completion.

Chesapeake Energy officials declined to comment on its future real estate development plans to The Oklahoman.

Ward 2 Oklahoma City Councilman Ed Shadid, who represents the area, said he spends a lot of time dealing with issues related to Chesapeake’s expanding presence in his district when the company’s development plans spill over into his constituents’ neighborhoods.

“One peculiarity has certainly been that the city has not seen a complete master plan of what the company envisions,” Shadid said. “If there was a master plan, I think it has changed maybe multiple times. It’s difficult for me to have changed expectations, because it wasn’t clear to me what the master plan was and what it continues to be.”