Touchstone: Small Team Big Impact
By: Ron Derven, contributing editor to Development magazine
Located adjacent to Seattle's Pike Place Market, Touchstone's Thompson Hotel project consists of a 160-room hotel as well as 94 apartments.
This year’s award winner — which prides itself on creating shared value for owners, tenants and the community — developed more than 2 million square feet of space in 2015 with a staff of 10.
WHEN THE SEATTLE-based real estate development firm Touchstone presented awards to its team members last year, it glued plastic ninjas to the awards. Those highly trained and focused warriors were a good-natured recognition of what the 10-person Touchstone team had accomplished in 2015. The firm had its best year ever, developing over 2 million square feet of space and leasing 1.1 million square feet to three of the most sought-after tenants in the market, including 800,000 square feet to Amazon.com, 200,000 square feet to Tableau Software and 112,000 square feet to HBO. Over the past decade, Touchstone has broken ground on 12 projects comprising nearly 3 million square feet of space.
For these accomplishments, as well as for the firm’s financial consistency and stability, the outstanding quality of its products and services, its ability to adapt to market conditions and its active support of NAIOP and the broader community, NAIOP has named Touchstone its 2016 Developer of the Year.
Douglas Howe, who founded the company in 1982, says that he was stunned by the honor. “I feel quite emotional about winning this award; it gives us all a tremendous sense of accomplishment for all of the things we have tried to achieve over the past 30-plus years.”
“We are a small company, and to receive this kind of recognition from our peers is wonderful,” adds A-P Hurd, president and chief development officer of the firm.
Howe launched Touchstone in Tacoma, Washington, in the early 1980s with a focus on historic rehabilitation. Later that decade, he moved the company to the Seattle area to work on ground-up development. By the mid-1990s, Touchstone’s projects had grown in size, scale and complexity. Howe then tapped Jim O’Hanlon, who had a legal and accounting background, as his partner. A few years later, he brought on Shawn Parry, who had deep construction experience, as the third partner, to manage the buildout of the company’s growing number of projects. Focusing solely on the Seattle-area market — something it continues to do today — the firm flourished. By 2005, with all three partners approaching their 60s, they created a succession plan to transition the company to a new generation of professionals.
In 2007, they hired Hurd to lead that succession strategy, to hire that new generation of professionals and to further grow the company. Prior to joining Touchstone, she served as director of strategic development at McKinstry, a large, full-service real estate company with offices throughout the U.S.
NorthEdge, a 210,000-square-foot tech office building at the north end of Lake Union in Seattle’s Fremont neighborhood, features a central courtyard and views of Gas Works Park, the lake and the city skyline.
The succession plan came to fruition in 2014, when Touchstone was purchased by Urban Renaissance Group (URG), a property and real estate investment manager headed by founder and CEO Pat Callahan and backed by the Seattle investment company Joshua Green Corp. Howe says that this move brought together three Northwest companies that are deeply committed to the region, which has helped assure Touchstone’s future. Callahan was named CEO of Touchstone; Hurd became president and chief development officer; and the firm’s three original partners retained consulting roles with the company.
“We acquired Touchstone for three reasons,” explains Callahan. “Douglas Howe and his partners put together a new generation team at Touchstone of incredibly talented people; we love the projects that they are creating; and, finally, there is great synergy between what URG is doing and the projects that Touchstone is developing.”
A Remarkable 2015
Touchstone had a remarkable 2015 by any estimate, but it was the culmination of many years of planning, according to Hurd and Howe. It was made possible by the company’s financial stability, its ability to accurately judge market rhythms and its smart, nimble in-house team.
Touchstone is not a long-term holder of the properties it develops. Rather, it sells them opportunisti-cally when the price and market are right. In the last cycle, for example, it sold its completed projects at the peak of the market, which put the company in a strong cash position to obtain new sites to develop during the next market upswing.
Touchstone’s Troy Block project, the redevelopment of an entire superblock in Seattle’s South Lake Union neighborhood, features 800,000 square feet of office space in two L-shaped towers.
“We spent years teeing up the projects after the last major downturn, and they all came to fruition in 2015,” explains Hurd. “When there was no capital investing in development, we were tying up and entitling sites. Everyone thought we were crazy.
“This is a testament to our founder, Douglas Howe, whose strong relationships in the Seattle community helped us secure these project sites. We had an extraordinarily severe downturn here, and at times it was hard to see that things would eventually turn around. Everyone was hunkered down while Touchstone was planning seven, eight, nine projects. At one point I said to Douglas, ‘Are you sure we shouldn’t stop? How are we ever going to execute all of these projects if they all happen at the same time?’ He responded that we had great sites and a great team, and that we would figure out what to do with them when the time was right. ‘Anyway,’ he said, ‘they probably won’t all work out’.”
They all worked out. When equity partners came back into the market, all of the planned projects on the land Touchstone had secured and entitled during the dark years of the Great Recession were capitalized within a short period of time. Further, all of this positive activity occurred around the time that URG purchased Touchstone, which made even more capital available for some of the projects, notes Hurd.
“We went from famine to feast in a matter of a couple of years,” she says. “The projects were all worthwhile opportunities, so we just kind of dislocated our jaws and figured out how to swallow the whole thing.”
Howe says that the Pacific Northwest in general, and Seattle in particular, is a high-barrier-to-entry market with extensive, time-consuming approvals required. “That’s why we needed to be strategic with respect to those opportunities,” he says. “We needed to commit early and we needed to be ready early in the cycle as the capital returned to the market. Projects that get capitalized late in a cycle can be left standing when the music stops.”
Projects That Will Last a Century
In addition to building projects with strong financial underpinnings, Touchstone also wants to build projects that will positively impact Seattle and the Northwest for the next 30, 50 or even 100 years. It also intends to remain a player in this marketplace for a long time. Today, its focus is on tech office and hospitality projects.
Touchstone’s Hill7 is a 300,000-square-foot building featuring 280,000 square feet of tech office space and a “third-place” lobby with three integrated retail spaces and comfortable seating for tenants and visitors.
The Seattle office market is driven by tech tenants that require large (25,000- to 40,000-square-foot) floorplates. Touchstone has a good understanding of these tenants’ culture — which is marked by a respect for youth, individualism and authenticity — and designs its buildings to attract them. The firm wants its buildings to be as attractive to the casual passer-by as they are to tenants. It therefore pays special attention to the first two stories of each building because, in an urban setting, that is what most people see, notes Hurd.
Touchstone takes great pains to enhance the experience offered by those first two stories for both tenants and passers-by. It takes special care to install artwork in public places, both inside and outside the building. Its Ninth and Stewart project featured a 15- by 5- by 10-foot glass sculpture. Its West Eighth lobby holds several art pieces, while at Hill7, the entire wall of the core is built to be infused with art, the lobby features a custom mirrored-ceiling art piece and the elevator lobby ceiling features yet another work of art. Touchstone has commissioned two large pieces for the public space at its Troy Block development, where it allocated more than $600,000 for art alone. Tilt49 has an 80-foot wall that is
“We think about the experience of someone walking by one of our buildings,” says Hurd. “We want to create a sense of place and artfulness with small, discernable details. Rather than a big, monolithic structure, we want to create a rich textural experience for the city. If we can do that, then people will love our buildings, pay to be in them and want us to build more of them.”
Touchstone adds a great deal more to its buildings. Howe says that the company long ago discarded formal lobbies. Instead, it creates spaces with comfortable seating where people can talk with friends or colleagues; read current newspapers or a continually refreshed collection of books; enjoy fresh, locally grown food prepared by local businesses; attend a health fair and even get a flu shot; or simply work in a place other than their own office. All of its lobbies are designed as “porous” spaces to attract both tenants and passers-by into its buildings.
Touchstone refers to these areas as “third places”; social spaces separate from one’s home (the “first place”) and office (the “second place”). These third places are not limited to the lobbies of Touchstone projects. At its Tilt49 building, Touchstone also created a 7,000-square-foot ninth-floor deck with a unique feature: a real cabin. Tenants can hold meetings in the cabin, attend regularly scheduled yoga or tai chi classes on the deck or simply relax and enjoy the space.
“We want to build the best buildings in the community and provide those amenities and benefits that will stand the test of time. We never want to look back at one of our buildings and say, we could have done better,” declares Howe.
A Leader in Environmental Design
Touchstone prides itself on being a leader in environmental design and construction. Many of its projects are located on former urban brownfield sites. All of them are built near transit hubs with plenty of bicycle storage to cut down on automobile use, which is becoming a major challenge in the region. The company also works tirelessly, on its own and through NAIOP Washington State, to push for greater emphasis on mass transit initiatives for the region.
In addition, all Touchstone projects qualify for LEED Silver certification or better; most qualify for LEED Gold. The company worked with the U.S. Green Building Council to develop the first pilot Core and Shell designation and has greatly advanced the art of reusing and incorporating older urban buildings in its new construction.
At two of its latest projects, Touchstone has taken steps to prevent rainwater draining off the roofs from flooding into sewers. Its Hill7 and Hilton Garden Inn projects have “blue roofs,” which retain and then slowly release water, helping to stem the flow of water into sewers during Seattle’s infamous rainfalls.
Tenant spaces offer operable windows and increased ventilation to bring fresh air indoors. Upgraded, brightly lit stairwells encourage tenants to avoid elevator trips and get a little heart-healthy exercise. Office buildings feature bike rooms, state-of-the-art video conferencing facilities in common areas, destination-dispatch elevators and individualized utility metering.
To ensure that the firm is delivering everything that today’s and tomorrow’s office tenants want, Touchstone conducts in-depth interviews with its tenants several years after move-in. The company uses the information obtained from these interviews to determine what other features it should include in new projects. It also researches buildings globally to identify new, innovative features for its next projects.
The Future of Cities
Touchstone has been extremely sensitive to how its buildings impact the urban experience because it sees cities playing an increasingly important role in human development, both in the U.S. and globally. “We are in one of the most intense urbanization periods in all of human history,” notes Hurd, who, in addition to being a developer, is a faculty member and Runstad Fellow at the College of Built Environments, University of Washington, where she teaches land economics and public policy. She is also the author of numerous articles and coauthor (with her father, Al Hurd) of a book, “The Carbon Efficient City” (University of Washington Press, 2015), which details how the real estate industry can be more successful while at the same time making progress on environmental challenges.
“There is still the strong pastoral ideal of having your own ranch on 10 acres of land,” says Hurd, “but with the number of people on this planet, we need to have cities that offer that same promise of delight because that is where most people will live.
“On a very micro level, as real estate developers, it is our job to think about how cities can be catalysts for economic opportunity and be delightful places to live. Creative, intelligent people come together in close proximity in urban environments. That is where the energy is created for the next great ideas.”
Touchstone’s Impacts On Its Community and NAIOP
Although Touchstone’s lean team consists of just 10 employees, the company has made a big impact contributing to organizations that aim to make Seattle a stronger community and a healthier place to live. Touchstone employees volunteer with the Downtown Seattle Association, the Economic Development Council of King County, the Girl Scouts of Western Washington, Ronald McDonald House Charities of Western Washington & Alaska and many other organizations.
The company’s philanthropy and generosity also touch 35 to 40 local and national organizations, from the North Seattle French School and the Northwest Natural Resource Group to the Leukemia & Lymphoma Society and National Public Radio.
Touchstone is also a strong supporter of NAIOP; all seven of its real estate-oriented employees are involved in the organization.
- Douglas Howe has served as president of NAIOP Washington State, as board chair of NAIOP Corporate and as a Governor and chairman of the NAIOP Research Foundation.
- A-P Hurd served as a board member of NAIOP Washington State for six years and has a strong record of chairing many chapter committees. She served as chapter president in 2014 and as chair of the NAIOP Washington PAC in 2015. She says that her book, “The Carbon Efficient City,” was inspired by her NAIOP policy work.
- Partner Shawn Parry has served on a number of NAIOP Corporate committees, including the Sustainable Development Committee.
- Vice President of Development Kristin Jensen has served as NAIOP Washington State board member, treasurer and chair of the finance committee. She is the chapter’s incoming (2017) president. Like Hurd, she has a strong record of chairing many chapter committees.
- Senior Development Manager Joe Polito also has chaired a NAIOP Washington State committee.
In addition to the accomplishments noted above, both Hurd and Howe are longtime members of NAIOP Washington State’s Government Affairs Committee, where they advocate for policies that support the region’s economic and social sustainability. They have been especially active in leading the fight for improvements in mass transit to help combat the Seattle market’s significant traffic congestion challenges.