The ongoing proxy fight between SandRidge Energy Inc. and one of its largest shareholders could have serious ramifications on downtown Oklahoma City, city and industry observers say.

Construction is shown in front of the SandRidge Energy Building on Feb. 8 in Oklahoma City. Photo By Steve Gooch, The Oklahoman

Activist shareholder TPG-Axon Capital is trying to take control of the Oklahoma City energy company’s board. If successful, the shareholder group has said it would consider selling the company.

The threat comes nearly seven years after Anadarko Corp. bought Kerr-McGee Corp. eliminating or moving to Houston 200 Oklahoma City jobs and vacating a large section of downtown Oklahoma City.

SandRidge later bought the old Kerr-McGee headquarters and has filled it with 720 employees.

While a SandRidge departure would take with it far more employees than Kerr-McGee did, Oklahoma City is much more able to handle such a loss today, said Mickey Hepner, dean of the University of Central Oklahoma College of Business.

“It would be easier to absorb, but it still wouldn’t be pleasant,” he said. “Oklahoma City is recognized as a much more attractive place to be and a much more attractive place to work today. From that perspective, the city has changed such that we would still be perceived as a rather cool, upcoming, dynamic city.

“The loss of a company the size of SandRidge would be a little bit of a dent in this shiny new image Oklahoma City has.”

The loss of 700 relatively high-paying jobs would hurt the city’s commercial and residential real estate markets and affect the whole economy, Hepner said.

“But the biggest concern is the psychological impact on the city and perception of Oklahoma City,” he said. “Part of what makes this an attractive place is we’ve started to change the perception of what this place is. If there’s a hint of a bust-type atmosphere coming, that changes the story we’re trying to tell about the city.”

Because the Oklahoma City economy is more diversified, the city is better equipped today to handle the loss of a large employer, said Roy Williams, president of the Greater Oklahoma City Chamber.

“When you look at our employment sector today, you see bioscience growth and 40,000 plus jobs in aerospace. The service sector has grown substantially,” he said. “With the different types of businesses that are growing our economy, we’re not overly reliant on any one sector.”

Even within the energy sector, Oklahoma City is more diversified today than it was seven years ago, Williams said.

“Kerr-McGee was the big company in town. Kerr-McGee had the skyscraper,” he said. “When you look at our landscape today, Devon Energy has a tower multiples the size of Kerr-McGee. Now we have SandRidge and Continental (Resources). When Kerr-McGee left, Chesapeake (Energy) was just beginning to come into its own. So it’s a really different landscape today.”

The city’s economic diversification also has insulated its housing market, said Keith Taggart, president of the Oklahoma City Metro Association of Realtors.

“At this point, the market is so strong and the number of people moving into Oklahoma City is much more than in our history,” he said. “We have lots of buyers, but not enough inventory for the number of buyers we have. I wouldn’t think any negative news at SandRidge or any other company would be enough to bring us down.”

Yet downtown observers are watching the SandRidge drama closely, noting that in just five years the company has become a major anchor of the central business district.

Williams is among those who recall it was 2007 when SandRidge CEO Tom Ward entered into a three-way real estate transaction involving his former company, Chesapeake, and Houston-based Anadarko.

Just a year earlier, Anadarko acquired Kerr-McGee and left empty the company’s 29-story tower at 123 Robert S. Kerr Ave. Chesapeake bought some of Kerr-McGee’s energy holdings and its downtown real estate, and then sold the real estate to SandRidge for $22.3 million.

SandRidge under Ward’s leadership quickly established itself as a major corporate anchor downtown, embarking on a $100 million redevelopment of the old Kerr-McGee headquarters now known as SandRidge Commons. The project includes an extensive renovation of the adjoining historic Braniff Building, which will provide additional office space for the company’s workforce, while the ground floor is already leased to a popular new restaurant, Kitchen No. 324, and the Barber Salon, which moved from First National Center.

With renovations wrapping up at the Braniff Building, the company this past year started construction on a new five-story “amenities” building at 120 Robert S. Kerr Ave. that will house a new company auditorium, fitness center, child care operation and restaurant.

Williams noted the company financially supported the construction of a children’s pavilion and zip line venue along the Oklahoma River, while Ward also is a partner in the ownership of the Oklahoma City Thunder. SandRidge also partnered with Chesapeake in redesigning and rebuilding Kerr Park at Robert S. Kerr Avenue and Broadway.

“We’re so fortunate in Oklahoma City, and we take it for granted that headquarter companies do this in every community they are located in,” Williams said. “But in reality, that’s not always the norm.”

Tim Strange, managing director at Sperry Van Ness/William T. Strange & Associates, sees the shareholder challenge as an uncertainty casting a shadow on downtown’s momentum.

“I just have to think in terms of perception … it would be a disaster,” Strange said. “We got lucky years ago when they did the Anadarko/Chesapeake deal that gave them control of that 500,000 square feet that was Kerr-McGee. To have that back on the market, it wouldn’t be good.”

Strange said the downtown market, with Class A office vacancy estimated at 5 percent, is better than it was in 2007. But with all the changes to the property by SandRidge, it may be more difficult than some may think to market to a new company should the worst-case scenario for the city be realized with a Kerr-McGee-type demise.

“It’s all so special purpose in terms of their design and how they’re doing the block, and how they are repurposing it all for their own use,” Strange said. “Would someone else want to use it? ”

Uncertainty with both SandRidge and Chesapeake further north, Strange said, could lead to a lot of instability in the downtown and north-central office markets in years to come.

Williams echoed Strange’s concerns, adding Oklahoma City has been blessed not to end up with a major corporate headquarters sitting empty for years as has been witnessed in other cities.

For now, Williams said, he is, like most others, waiting and watching what happens next.

“It’s on the top of everyone’s mind, it’s being talked about,” Williams said. “What you never know is the depth of the passion out there on the other side — the other fund groups taking this initiative forward. You don’t know how deep their support is or what their intent is. Everyone I talk to wants to see Tom remain, the board remain, and see the company continue to grow here.”