How Another Impressive Transaction Shows That Buckhead Is Back
November 7, 2014
How Another Impressive Transaction Shows That Buckhead Is Back
Atlanta Business Chronicle

A few years ago investors wouldn't touch Buckhead. Today, it may be difficult to find a hotter office market in the Southeast.

Parkway Properties Inc. (NYSE: PKY) announced Oct. 30 it reached an agreement to purchase One Buckhead Plaza for $157 million.

At almost $340 a foot, the tower's acquisition price is notable. Buckhead office towers such as 3630 Peachtree ($390 per foot) and 3344 Peachtree ($346 per foot) have also fetched impressive numbers, according to data compiled by Cushman & Wakefield. (Note: The Chronicle's list of trophy sales on 20-A sources unofficial market data provided by developers).

Real estate investment firm Heitman bought 3630 earlier this year, setting the Buckhead record.

One Buckhead Plaza continues that momentum. Metzler Real Estate put the tower on the market earlier this year.

The building, at the intersection of Peachtree and West Paces Ferry roads, currently features asking rents in the high $20s per square foot, according to market data. As Buckhead's office market has tightened, though, it's possible Parkway can eventually push rents at One Buckhead Plaza to well over $30 a foot, leasing and development executives said earlier this year.

David O'Reilly, Parkway Properties' chief financial officer, recently told Wall Street analysts One Buckhead rents are still 20 percent below market rates.

"Additionally, there has been a recent increase in demand for resale space within the Buckhead submarket that has driven rates higher, which we believe we can capitalize on," he said in an earnings call with analysts.

Jayson Lipsey, Parkway Properties' chief operating officer, added "We think we can continue to drive rate growth at this building certainly in excess of where it is today."

Almost a decade ago, Crescent Real Estate Equities Co. purchased One Buckhead Plaza for $130.5 million, or about $320 a foot, according to Cushman & Wakefield. Metzler later took the majority stake in the property. It chose Eastdil Secured to oversee its sale this year.

Buckhead has come a long way in regaining investor confidence.

Four years ago, The Wall Street Journal's article about Atlanta's "Irrational Building Exuberance," punctuated by four spec towers under construction in the depths of a recession, was the buzz of the city's real estate circles. Vacancy was almost 30 percent in 2010 after the spec office buildings 3630 Peachtree, Two Alliance Center, Terminus 200 and Phipps Tower were completed.

It took steep concessions, but those towers have filled up. Buckhead Atlanta, the turnaround of the stalled Streets of Buckhead mixed-use project, has started opening new stores. New apartment towers are rising along Peachtree and others are planned for the Buckhead Village.

Now several years into the recovery, rents are soaring, and only one Buckhead office tower is underway, Tishman Speyer's Three Alliance Center. The 30-story building is still almost two years from completion.

GM plant sells for $50 million

General Motors sold its Doraville plant to an Atlanta-led team of developers for $50 million, less than what the automaker had originally asked for the property.

The acquisition price of the 165-acre plant site along the Atlanta Perimeter was confirmed by Fulton County records and Databank Inc., an Atlanta real estate research firm.

After GM closed the plant in 2008, it had sought between $60 million and $70 million for the site, which drew interest from a variety of buyers over that period, including The Atlanta Falcons, Porsche Cars North America and BMW, among others.

In 2010, Orlando, Fla.-based developer New Broad Street Group and DeKalb County planned to buy the GM property for $60 million. The DeKalb County Board of Commissioners rejected the deal.

Egbert Perry, founder, chairman and CEO of Atlanta-based The Integral Group LLC, led a development team that put the GM site under contract more than a year ago. The group purchased the site with $35 million in acquisition financing from Atlanta-based The Ardent Cos.

The financing is expensive, initially. The loan, which features an interest rate in the low teens, matures in less than a year.

There is a possibility for an extension, according to the loan documents. A more traditional lender would likely step in next fall after demolition, master planning and site work, Ardent executives said.

For now, Ardent is one of the non-bank lenders filling a financing void on speculative development as banks remain risk-averse following heavy losses in the last real estate cycle.

"Banks are not yet back in the game, making the kind of acquisition and construction loans they ought to be making," said Jonathan Eady, partner with the law firm Arnall Golden Gregory LLP, primary development counsel on the GM project. "I say 'ought' because I think they are leaving money on the table."

Over time, the Integral-led team plans to turn the GM site into into a walkable mix of office buildings, housing, stores and restaurants. The site would also be connected to MARTA rail.

New York-based architecture and design firm Perkins Eastman is the master planner for the redevelopment.

On The Record

Washington, D.C.-based research firm CoStar Group is launching a new Atlanta office focused on the multifamily sector

CoStar would put the office in Buckhead, people familiar with the move say. The company has entered final negotiations with Cousins Properties Inc. to locate the office in the Terminus mixed-use development.

Cousins' leasing executives could not comment.

CoStar would most likely occupy a floor in the 25-story Terminus 200 tower, sources say.

The Buckhead expansion stems from CoStar Group's $585 million acquisition earlier this year of CoStar Group already had a presence in Buckhead, where several commercial real estate companies, such as CBRE Inc. and Jones Lang LaSalle Inc., also have large Atlanta offices.

Two years ago, CoStar Group moved a new office into Phipps Tower, a new 20-story building by the upscale mall Phipps Plaza.

The multifamily sector, specifically apartments, have helped fuel the real estate recovery.

Everyone from developers to research firms have increased their focus on apartments. In Atlanta, the apartment boom started a little later compared with other markets such as Washington, D.C., but the sector is in full swing now, analysts say.

"More than three years have passed since this multifamily development cycle began, and signs of an apartment bubble are difficult to detect," said Chris Hall, of Haddow & Co. "Rents and occupancy rates continue to rise even as new supply enters the marketplace."

FCCI Services Inc. is leaving the Gwinnett Place area for a new office off Sugarloaf Parkway.

FCCI has signed a 12-year lease at 1755 North Brown Road, a mid-rise office building. The company will occupy 26,711 square feet.

FCCI is relocating from Satellite Place by Gwinnett Place Mall.

Jeff Frantz and Jeff Bellamy represented Equity Office/Blackstone. Cresa Atlanta's Bo Keatley represented FCCI in the transaction.

Retail investment continues to pick up in parts of Gwinnett County.

Pharrs Village shopping center in Snellville recently sold for just over $5 million.

The transaction closed Oct. 16.

The buyer was a 1031 investor from Henderson, N.C. The sellers were FA Ventures and PV Partners, both Atlanta-based.

CBRE Inc.'s Craig Taylor helped finalize the sale.

The 18,950-square-foot shopping center counts among its tenants Panda Express, Pacific Dental and Firehouse Subs.

One of Atlanta's top industrial real estate brokers has left Jones Lang LaSalle Inc. (JLL) for IDI Gazeley.

Paul Roeser, behind big industrial deals in the past year such as the new Procter & Gamble (NYSE: P&G) distribution center in Union City, will take an even larger role with IDI Gazeley.

Roeser will become a senior vice president of global business development, marketing and communications at IDI Gazeley.

Last year, Brookfield Property Partners L.P. announced it was buying IDI, Atlanta's largest industrial real estate developer, in a $1.1 billion transaction. Brookfield later launched the IDI Gazeley brand for its $3.5 billion global logistics property platform.

Chuck Francis has joined Colliers International Atlanta.

Francis is a former Cushman & Wakefield and Cousins Properties Inc. leasing executive.

He was with Cousins Properties when it sold its third-party leasing and property management portfolio.

At Colliers, he will serve as senior vice president of the landlord services group.

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