Atlanta Business Chronicle From the January 3, 2005 print edition



Download 15.62 Kb.
Date10.08.2017
Size15.62 Kb.
#30519
Atlanta Business Chronicle

From the January 3, 2005 print edition

Real Estate Notes

Atlanta's office market in the recovery phase

Jarred Schenke
Atlanta's embattled office leasing market is recovering after finally hitting bottom this year, according to a preliminary report by Cushman & Wakefield of Georgia Inc.

"We're not recovered, but we are in the recovery phase," said James Phillpott, director of research with Cushman & Wakefield.


According to the report, metro area office landlords absorbed 2.3 million square feet for all of 2004. Absorption means companies leased more space from landlords than companies gave back to landlords.
Much of that strength showed up in the office submarkets of Midtown and along Georgia 400, each reporting absorption of more than 1 million square feet. Midtown especially experienced a banner year with office deals like Savannah College of Art and Design taking the former Equifax Inc. headquarters space on Peachtree Street and SouthTrust Bank, real estate firm Carter, and law firm Arnall Golden Gregory LLP signing leases at Atlantic Station, Phillpott said.
Other strong submarkets included:
Buckhead with 512,600 square feet absorbed;

Interstate 75 office market with 729,000 square feet absorbed;

And Northwest Atlanta with 718,000 square feet absorbed.

Companies gave up space in such submarkets as along Interstate 85 in Gwinnett County with more than 300,000 square feet emptied; the Northeast Atlanta submarket with almost 680,000 square feet emptied; and Peachtree Corners, which saw 258,700 square feet emptied in 2004.


Dorey Market Analysis Group, a local real estate research firm, was a little less optimistic on absorption in Atlanta for 2004, according to a preliminary office market report. According to the report, about 1 million square feet were positively absorbed during the year, topped by a 152,700-square-foot absorption number for the fourth quarter. Still, it was a better outlook than what Dorey saw in 2003 when the market broke a little better than even.
Despite the losses in some markets, some real estate experts remained optimistic about the final results in metro Atlanta.
"We've seen a lot of more deal flow, a lot more activity, in just the last six to eight months than we saw in the last 36 months. So I think the recovery is under way," said John Heagy with Hines Interests L.P., the developers of 1180 Peachtree, the future home of King & Spalding LLP in Midtown.
But Phillpott cautioned that the year of the megadeal -- those office deals tallying portions of entire office towers -- may be over for now. Most of those have already consummated deals during 2004.
"I think 2005 is going to be marked by just a slew of 20,000-square-foot tenants ... moving around," Phillpott said. "I'm sure they'll be some big deals out there, but they are just nowhere near my radar screen at this point."

Some larger deals floating around the market include radio operator Cumulus Media Inc. (Nasdaq: CMLS), which is hunting 45,000 square feet, and law firm Rogers & Hardin LLP, which is eyeing upward of 30,000 square feet, Phillpott said.


Short deal

Shorter College inked a deal for 26,000 square feet at Powers Ferry Landing East - Building I, a 123,700-square-foot office building on Powers Ferry Road.


The college will use the facility for evening classes. Jeff Frantz with Jones Lang LaSalle Inc. in Atlanta brokered the deal for the landlord. Jim Devaney and Chad Koenig, both with NAI Brannen/Goddard LLC, represented Shorter.
Refinanced

Richard Bowers has finally got himself a better rate.


Bowers, founder of Richard Bowers & Co., has refinanced one of his mainstay downtown office buildings, 260 Peachtree Building, the 27-story, 305,000-square-foot glass-encased tower on Peachtree Street.
Bowers snagged a $40 million finance package from Chicago-based Cohen Capital LLC that helps bring the rate from more than 10 percent to between 6 percent and 7 percent, Bowers said.
"It's a lot lower than what I got," Bowers said.
Of course there's a catch. The new low rate, underwritten by BB&T Corp. (NYSE: BBT) with a $3 million letter of credit and supported by Northmarq Capital Inc. in Buckhead, is a floating rate based on the London Interbank Offered Rate (LIBOR), said Terry Connors, regional director for Cohen Capital. That means as the Federal Reserve raises interest rates, the rate on Bowers' loan also will rise. Connors did not disclose the exact rate.
"We thought it was quite a reasonable investment for us," Connors said.
Cohen typically seeks and finances value-added office opportunities -- buildings with a leasing struggle still remaining.
That's true of 260 Peachtree. Bowers purchased the tower in 1999 for $8.5 million when the building was nearly empty. He then renovated the tower for more than $20 million, according to real estate tracking firm Databank Inc.
Since then Bowers has struggled to fill the building, successfully snaring such tenants as Liz Claiborne and Atlanta Magazine to help fill it out to more than 70 percent occupancy.
That helped Bowers snag the better financing terms, Connors said.
But the risk remains that Bowers could be caught in an upsurge of the interest rate.
"Obviously he's assuming somewhat of an interest rate risk here," said Roger Tutterow, chairman of the department of economics and finance at The Michael J. Coles College of Business at Kennesaw State University. "But clearly he's made a calculation, and even if short-term interest rates come up, his [debt] service is going to be less" than what Bowers was paying under the old terms.
Tutterow said he sees Bowers moving to two possibilities: Either expecting to sell off the building in the next two years before interest rates possibly become high or leasing the building up a little more and then seeking some sort of permanent financing.
Cohen Capital's Connors said he expects the latter to be true.
"Floating rates always have that risk," he said. "But his anticipation I'm sure is that ... he'll finish his leasing program relatively quickly and be in a position to lock things down on a more permanent basis."
Bowers certainly was confident 260 Peachtree's rent roll will be more solid soon.
Despite a sluggish office leasing environment, particularly downtown, Bowers said he expects 260 Peachtree to be 90 percent occupied soon.

"Candidly, we've got a shot at being above 90 percent shortly. We've got several prospects out," Bowers said. "But it's been tough."


Shopping

A Greenville, S.C., investment firm has its $200 million kitty ready for a little real estate shopping in Atlanta.


TIC Properties LLC is pursuing its first Atlanta acquisition in 2005 with suburban office buildings, said Trevor Gordon, president of TIC.
"We want people to show us Atlanta property," Gordon said.
Like many real estate investors, TIC has grown in recent years as investors have turned from Wall Street to the real estate market for buildings with an established cash flow in the form of rents. In 2004, TIC invested $80.5 million in real estate, a 320 percent increase over 2003.
TIC's model is to use tenant-in-common money -- funds from the sale of one property that are funneled into another asset purchase, avoiding hefty tax bills.
But Gordon said the company's typical requirements -- strong stabilized office buildings with solid rent rolls -- will have to be eased in order to compete for properties in Atlanta.
"If you're willing to overcome some vacancies ... there's some tremendous buying opportunities right now," he said. "While there's a real opportunity for value properties, things that need a little T.L.C., our core investor is still looking for stabilized income."
TIC Properties also is shopping for buildings in Dallas, Houston, Chicago and Southern California, Gordon said.
Rising sun. A Japanese logistics firm has snagged a sizable lease in Gwinnett County.

Mitsui-Soko Co. leased 82,000 square feet for five years at The Summit at Corporate Lakes Phase II, a 164,300-square-foot warehouse off of Georgia 316. Darren Ross and Dave Watson with Grubb & Ellis Co. in Atlanta brokered the deal with John Wilson of CB Richard Ellis Inc. in Atlanta.


Of note. Remember the 41,000-square-foot warehouse sold to Asset Restoration LLC earlier in December?
The broker for that turned out to be Larry Smith with Meridian Property Group in Atlanta. Asset Restoration purchased the empty building at 2050 Will Ross Court in DeKalb County for a little less than $1 million.
And Will Yowell, Justin Parsonnet and Jay O'Meara, all with CB Richard Ellis, were the brokers for the Trizec Properties Inc. portfolio sale to Capital Partners Inc. Those buildings included Lakeside Centre and Newmarket Business Park.
-- Staff writer Lisa R. Schoolcraftcontributed to this column.
If you have news for Real Estate Notes, contact Jarred Schenke at (404) 249-1021; fax, (404) 249-1058; or e-mail (jschenke@bizjournals.com).

Download 15.62 Kb.

Share with your friends:



The database is protected by copyright ©ininet.org 2024
send message
    Main page
final results