Chesapeake empire marches on

[Pete]

Most of it was due to spending billions to acquire speculative mineral rights while at the same time natural gas prices have remained at historic lows. But generally speaking, they've been very undisciplined spenders and real estate is just part of that.

Just read today that they have shifted their gas/oil ratio from 83% to 70% in the last few years, and that diversification should help them.

[Plutonic Panda]

Yeah I couldn't believe how much they were paying for some properties.

[OKCTalker]

With all of the attention Chesapeake pays towards campus beautification (landscaping, Christmas lights, etc.), they have made huge mistakes in the location and positioning of their buildings. Those are mistakes that can't be rectified by moving a grove of trees or relocating a running track from here to there. A case in point is the main entrance to their campus. Where is it? Is it the stop light near 62nd & Western, or where Classen enters at 63rd, or Classen crossing Western, or is it somewhere along Classen on the back side now that employee parking and new construction is to the east? IMHO they should have made a large entrance at the corner of 63rd & Western that visually draws one's eye into the center of their main campus, surrounded by classic buildings containing core departments. Instead of a beautiful entrance and driveway at that intersection, they stuck another building there with three flagpoles. In fact, what you see along much of the main campus' periphery are mechanical systems, driveways and stairwells leading into buildings.

[warreng88]

It this where they were thinking of putting the boutique hotel?

No, that is where the old Tapwerks used to be: the south triangle.

[Spartan]

So what caused all of this? Was it due to all of the construction spending? I just can't imagine all their construction costing so much that it would cause a major downturn to the company. Sorry if it was stated elsewhere.

Well the thinking is beginning to emerge that Aubrey may need to personally finance some of this stuff

[CuatrodeMayo]

With all of the attention Chesapeake pays towards campus beautification (landscaping, Christmas lights, etc.), they have made huge mistakes in the location and positioning of their buildings. Those are mistakes that can't be rectified by moving a grove of trees or relocating a running track from here to there. A case in point is the main entrance to their campus. Where is it? Is it the stop light near 62nd & Western, or where Classen enters at 63rd, or Classen crossing Western, or is it somewhere along Classen on the back side now that employee parking and new construction is to the east? IMHO they should have made a large entrance at the corner of 63rd & Western that visually draws one's eye into the center of their main campus, surrounded by classic buildings containing core departments. Instead of a beautiful entrance and driveway at that intersection, they stuck another building there with three flagpoles. In fact, what you see along much of the main campus' periphery are mechanical systems, driveways and stairwells leading into buildings.

Good observation. With all the money spent on this campus, it is a dismal failure from a planning perspective. Same goes for the nearby Chesapeake-related developments (Classen Curve). It's bizarre.

[Spartan]

The problem from a planning perspective is that all the components that made this massive vision came last. When Chesapeake was finally on the rocks.

[Pete]

I predicted that Chesapeake would start selling some of the satellite office buildings they recently acquired, 1) because they are selling off assets and shrinking and 2) because they have a bunch of buildings on their campus being completed this year.

The sale has not yet been posted on the County Assessor site and it will be very interesting to see what they sold it for. In addition to paying $38.2 million, they also put in at least another $3 million in building permits.



IBC Bank-Oklahoma buys office building for Oklahoma City headquarters
By Richard Mize | Published: December 29, 2012 0

The 10-story, Class A building at 3817 Northwest Expressway — known as Hertz Financial Center for more than a decade, even after Hertz Corp. moved in 2002 — will continue to house IBC Bank's Oklahoma headquarters.

Hertz sold the building, constructed in 1976, to Caliber Development, led by Jade Noles, in 2007 for $20 million. Caliber spent $5 million to upgrade the building.
Chesapeake Energy bought it just more than a year ago, paying $38.2 million. The Oklahoma County assessor estimated its market value at $30.2 million last March.

[SharkSandwich]

I predicted that Chesapeake would start selling some of the satellite office buildings they recently acquired, 1) because they are selling off assets and shrinking and 2) because they have a bunch of buildings on their campus being completed this year.

The sale has not yet been posted on the County Assessor site and it will be very interesting to see what they sold it for. In addition to paying $38.2 million, they also put in at least another $3 million in building permits.

IBC Bank-Oklahoma buys office building for Oklahoma City headquarters
By Richard Mize | Published: December 29, 2012 0

The 10-story, Class A building at 3817 Northwest Expressway — known as Hertz Financial Center for more than a decade, even after Hertz Corp. moved in 2002 — will continue to house IBC Bank's Oklahoma headquarters.

Hertz sold the building, constructed in 1976, to Caliber Development, led by Jade Noles, in 2007 for $20 million. Caliber spent $5 million to upgrade the building.
Chesapeake Energy bought it just more than a year ago, paying $38.2 million. The Oklahoma County assessor estimated its market value at $30.2 million last March.

A few years back when CHK was spending like crazy and could seemingly do no wrong, I had a wise friend tell me, "Regardless of how smart those guys think they are, at some point fundamentals apply." I think we are seeing all of that ridiculous overpaying coming back to bite Aubrey & Co.

[LuccaBrasi]

Very true about the fundamentals. I was at a Christmas party talking with an acquaintance high up the CHK chain, enough so I believe they meet with Aubrey on a regular basis (weekly if not daily). I got the strong impression Aubrey is conducting business as he always has but obviously with a much shorter rope from the board, and everyone around him was just hanging on for dear life biting their nails about the future. It sounded to me like the many years of fun and growth in the wild wild west has turned into a high stress situation. Another acquaintance that is in the job placement business told me about they're starting to see a several CHK people contemplating or actually looking to jump ship. I sure hate to hear things like that and hope, as we all do for the good of OKC, that CHK can stabilize the negativity and downward appearing momentum and remain a strong local company.

[Just the facts]

The CHK campus reminds me of the Cisco campus in Milpitas. I can't figure out why people keep building them.

[heyerdahl]

The CHK campus reminds me of the Cisco campus in Milpitas. I can't figure out why people keep building them.

Cisco is way way worse

[Just the facts]

Cisco is way way worse

It is now, but there was a time when all their building were full. Now it is a vast area of nothing, with buildings that all look the same and no one wants to buy or use. They could easily film zombie movies there.

[Bailey80]

I predicted that Chesapeake would start selling some of the satellite office buildings they recently acquired, 1) because they are selling off assets and shrinking and 2) because they have a bunch of buildings on their campus being completed this year.

The sale has not yet been posted on the County Assessor site and it will be very interesting to see what they sold it for. In addition to paying $38.2 million, they also put in at least another $3 million in building permits.



IBC Bank-Oklahoma buys office building for Oklahoma City headquarters
By Richard Mize | Published: December 29, 2012 0

The 10-story, Class A building at 3817 Northwest Expressway — known as Hertz Financial Center for more than a decade, even after Hertz Corp. moved in 2002 — will continue to house IBC Bank's Oklahoma headquarters.

Hertz sold the building, constructed in 1976, to Caliber Development, led by Jade Noles, in 2007 for $20 million. Caliber spent $5 million to upgrade the building.
Chesapeake Energy bought it just more than a year ago, paying $38.2 million. The Oklahoma County assessor estimated its market value at $30.2 million last March.

Bank pays $32M for Chesapeake property | The Journal Record
OKLAHOMA CITY – Chesapeake Land Development Co. has sold one of its northwest Oklahoma City properties to IBC Bank for $32 million, public records show.

Along with the $3 million in renovations, it looks like Chesapeake lost about $9 million on this property alone. I wonder what the future holds.

[OKCTalker]

There was an Arcadia Farms LLC sale reported over the weekend near 192nd & May. I'm told that Arcadia Farms is also selling agricultural properties in NE Oklahoma County back to the heirs of the original owners (at a loss, of course). Arcadia Farms isn't Chesapeake Land, but they're related, and this seems to indicate the start of a clear trend of across-the-board property sales.

[onthestrip]

Noticed that Arcadia Farms sale as well. What a sweet deal for the heirs, sell it at a huge premium and then be able to buy it back at a discount. Heckuva deal.

[Pete]

There was an Arcadia Farms LLC sale reported over the weekend near 192nd & May. I'm told that Arcadia Farms is also selling agricultural properties in NE Oklahoma County back to the heirs of the original owners (at a loss, of course). Arcadia Farms isn't Chesapeake Land, but they're related, and this seems to indicate the start of a clear trend of across-the-board property sales.

We've all been concerned about what would happen to the real estate market if Aubrey and CHK had to shift from buyers to sellers.

Fortunately, the market is strong enough to absorb a lot but it all depends on how much they dump and the timing; i.e. the spacing of when everything hits.

[OKCTalker]

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

[onthestrip]

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

Who knows. But I have a feeling you wouldnt be asking who it was if the name was Bob Smith.

[Bailey80]

I think that is the home builder Home Creations. Same address.

[OKCTalker]

Who knows. But I have a feeling you wouldnt be asking who it was if the name was Bob Smith.

Oh, I'd be asking, but it would be "WHICH Bob Smith just bought..." I figured that someone with a unique name like that would be quickly known here at OKC Talk, and that would indicate what his plans would be for the property.

[Roger S]

I think that is the home builder Home Creations. Same address.

You are correct.

[onthestrip]

CHK unloaded another office building recently, located at 301 NW 63rd. Paid $10mil for it a year ago, sold it for $6.4 mil. Good investment huh?

Chesapeake subsidiary sells office building | The Journal Record

[Pete]

That's the Harvey Parkway, bought 1/13/12 for $10 million and sold 12/26/12 for $6.4 million.

They also put in a bunch of improvements in between, so they basically lost 50% on that building in less than a year.




Will be really interesting to see how many more of these properties are dumped. I'd also bet that they owe more than they are able to recover in sales on most these buildings.

[OKCTalker]

Don't forget that CHK frequently paid 2x (or more) of the fair market value when acquiring properties years ago, so when someone pays 50% or less today, that simply re-establishes the original FMV. Sellers got rich when CHK was buying - I don't think today's buyers should expect to get a bargain.

Going one step further, I suspect that the transactions will involve large buildings and cash buyers. Banks will have a hard time participating due to the difficulty in determining a solid FMV during a CHK dump, and not knowing how the value of real estate will be affected if CHK has trouble with their turnaround.