Under the Radar: Meet Scot Sellers

“Every analyst has written that we have the best portfolio in the country,” Sellers says. “Whether or not we have the best development pipeline is arguable, but it is certainly one of the very best. No one disagrees with that—whether it is one or two, it is right there at the top.” Of course, it was those same analysts who dinged Archstone-Smith—and virtually all other publicly traded multifamily REITs—for development investments seen as dilutive to net-asset value and ancillary to powering share price-boosting FFO.

Not so Tishman Speyer and Lehman Bros., Sellers says, who value Archstone-Smith’s insistence on both the long and short term real estate investment horizons so common in the private sector. “The thing they liked about our company so much is that we always thought and talked and acted like a private company,” Sellers says. “Even as a REIT, we said, ‘Look, we are not in the business of creating FFO.’ We literally have made billions of dollars through our investment efforts in developing well located apartment buildings but the public market ignores that because it is not FFO—they are focused on that to a fault. The private owners love those billions of dollars in development and they want us to keep doing it. Their marching orders are, ‘Great, how much more can we do?’”

MIXING IT UP The answer to that question is quite a bit, says Al Neely, Archstone-Smith’s chief development officer overseeing activity in the company’s 10 core markets of Seattle, San Francisco, Los Angeles, Phoenix, Dallas, Houston, Atlanta, Washington, D.C., New York City, and Boston. Across the markets, Archstone-Smith is seeing a great deal of opportunity, Neely says. “We did have some difficulty the last few years competing with condo developers, but with the downturn in that market, we are now in a better position to control sites and begin to make things happen.”

Increasingly for the company, those things happening on the development end involve leveraging mixed-use capabilities that have clandestinely emerged as one of Archstone-Smith’s primary skill sets. “We quietly went about establishing ourselves in mixed-use, but I think people know we are in this space and here to stay,” Neely says. And when Neely and other executives at Archstone-Smith say “mixed-use,” they don’t mean some street-level coffee shops and Laundromat retail, they mean titanic footprints involving apartment, condo, office, and high-end anchored shopping experiences.

Case in point: the redevelopment of Washington, D.C.’s convention center site, an $800 million dollar joint venture with Gerald Hines that Neely describes as “significant retail, significant office, about 460 apartments and a couple hundred condominiums, all integrated over a parking deck.” The convention center development—expected to break ground later this year—will likely emulate Archstone-Smith’s Wisconsin Place, a similar D.C. mixed-use joint venture with New England Development that is two-thirds complete and is looking at a late 2008 lease-up of 432 units that share a parking deck with Bloomingdales, Neiman Marcus, and Whole Foods—a set up that Neely describes as “a destination living and shopping experience.”

Green building is also getting a closer look by Archstone-Smith development teams eager to explore new things that might not have been pleasing profit drivers on Wall Street. In Manhattan, the 627-unit Archstone Clinton is on track for LEED certification by the U.S. Green Building Council and boasts building materials with low- or no-VOC emissions, high-efficiency condensing boiler equipment, artificial light-dimming systems, and variable-speed hot water pumps that use less energy by matching water flow to demand.

“At least right now, green building is in the early stages of moving into the multifamily world,” says Archstone executive vice president Neil Brown, who heads up development in the Eastern and Southern states under Neely. “As developers think about it more and come up with ways that are cost effective to incorporate it into their buildings, I think the industry as a whole is certainly going to gravitate towards it.”