Real Estate Notebook: Three Alliance Center sets record price for Atlanta office project – Atlanta Business Chroniclecldde
The pension fund for the state of Florida has acquired the 30-story Buckhead office tower Three Alliance Center, setting a record price for Atlanta.
The 501,000-square-foot tower sold for about $270 million, according to people familiar with the transaction. The Florida Retirement System Pension Plan paid roughly $535 a foot, which sets an Atlanta record based on sales-price-per-square-foot. Stockbridge Capital Group is advising the pension and will be the asset manager for Three Alliance Center.
New York’s Tishman Speyer was the seller, effectively ending its more than 10-year run as a major player in Atlanta’s office market.
The transaction for Three Alliance, a “speculative” tower built without pre-leased tenants, shatters the previous high-water mark for similar office properties. Midtown’s 1180 Peachtree sold for about $407 a square foot a little more than 10 years ago.
It’s also a record, based on price per square foot, for any Atlanta office building. For example, the 13-story Park Center 1, the first tower in State Farm Insurance Co.’s new Dunwoody campus, was acquired last year in a sale-lease back for $470 a foot.
It will be interesting to see how the Three Alliance sale affects development of new “spec” towers.
The transaction may spur confidence among capital sources that they can justify underwriting the construction of new buildings at well over $400 a foot and still have the ability to exit the deal.
Yet, it’s also true that the restraint lenders have shown for new construction limited the supply of new office space and reduced the number of landlords Tishman Speyer competed with for large, creditworthy tenants. That helped Three Alliance lease-up at top-of-the-market rents.
The sale validates Tishman Speyer’s bet on Buckhead. When it started work on Three Alliance more than three years ago, it was seen as too risky. At the time, Buckhead was still shaking off the effects of over-development in the previous real estate cycle.
The project, led by managing director Chris Ahrenkiel, had a sound location overlooking Georgia 400 and MARTA’s Buckhead station. It landed leasing deals with companies including as CBRE Group Inc., Aon plc and Global Payments. Three Alliance was more than 90 percent leased when it recently sold and achieving gross rents as high as $46 per square foot.
For comparison, top office rents a decade ago in Buckhead were closer to $35 a foot.
A CBRE Inc. team of Will Yowell, Justin Parsonnet and Jay O’Meara was marketing Three Alliance on behalf of Tishman Speyer and oversaw its sale.
Rapidly expanding Insight Global
Atlanta staffing giant Insight Global will move approximately 800 employees into a new 16-story building to be developed next to Perimeter Mall and the Dunwoody MARTA station.
Insight Global will occupy 175,000 square feet, or more than half of the project. It’s one of the largest office leases in metro Atlanta during the past year and yet another sign that more companies, from Midtown to the parts of the Atlanta suburbs served by MARTA rail, are moving their headquarters and regional offices to projects where employees have options to walk, bike, or ride the train.
The next phase of the Dunwoody State Farm campus will include a 22-story building that could begin going vertical later this year. Like Twelve24, the project is also being developed next to MARTA.
Last year, Atlanta Business Chronicle reported that Trammell Crow had the almost 4-acre site next to Perimeter Mall and the MARTA station under contract and that the project had emerged as a favorite to land Insight Global, which has been expanding rapidly. It’s unclear if Trammell Crow completed a deal to buy the site, but it has entered a joint venture with CBRE Global Investors to develop the 334,000-square-foot project. It’s slated to rise on land that includes a parking lot between Nordstrom, Macy’s and the train station.
Trammell Crow and CBRE Global are calling the development Twelve24.
Jodi Selvey and Emily Richardson of Colliers International Atlanta represented Insight Global in the transaction, though terms of the lease were not immediately available. Eric Ross of CBRE Group Inc. represented the project’s ownership.
Duda Paine Architects is the design architect for Twelve24. Wakefield Beasley & Associates is the architect of record.
Insight Global is in expansion mode. It is ranked as one of the fastest growing staffing firms for more than a decade, with more than 43 locations in the United States and Canada.
It is expanding in several cities, upgrading its offices and locating closer to amenities. In Houston, it moved into modernized space it dubbed its “office of the future.” In Minneapolis, it increased its office capacity to 94 employees and gave them “an incredible view of downtown,” the company said. In Denver, it relocated downtown next to the 16th Street Mall.
In Atlanta, Insight Global maintains its headquarters at Ashford Green, where it occupies about 85,000 square feet in the six-story office building along Ashford-Dunwoody Road. Its new building in Dunwoody, which will also include street-level retail and restaurants, could be finished sometime in 2020, according to Trammell Crow.
Parkside buys Midtown buildings
An Atlanta real estate firm says it will convert a collection of Midtown properties at Peachtree and 17th streets into a “unique, creative loft office and retail environment.”
Parkside Partners confirmed it bought the three buildings at 1389, 1401 and 1409 Peachtree Street on Dec. 22. Combined, they include up to 150,000 square feet.
Parkside Partners paid about $18.6 million for the properties, according to Fulton County. The Simpson Organization was the seller.
The future of the buildings had been in flux for more than a year.
In 2016, The Simpson Organization presented a concept for a large mixed-use project with 190,000 square feet of office space, 12,200 square feet of retail, 206 residential units and 140 hotel rooms. Those plans went before the Midtown Alliance.
But, Parkside Partners won’t go in that direction.
In fact, a good model for the redevelopment is probably the $12 million renovation of a three-story building at 1280 West Peachtree Street. Interface Inc., a large maker of modular carpet, is relocating its headquarters to that project later this year.
Parkside Partners said the redevelopment of 1389, 1401 and 1409 Peachtree will feature a 300-foot linear, urban greenspace; balconies and a rooftop deck; and access to public transit and Midtown’s amenities.
The project’s architect is ASD | SKY. Financing is being provided by State Bank and Trust and Atlantic Capital Bank.
Parkside Partners has made transit-oriented developments a priority. It has multiple projects that have been recently completed or are under development near MARTA stations.
$250 million Westside project
Atlanta developer Wood Partners has filed plans for a $250 million project that could eventually put 700 residential units and office space alongside the future Westside Park at Bellwood Quarry.
Wood Partners wants to transform the 19-acre Dykes Paving & Construction site at 1350 West Marietta Street, sparking one of the largest developments on the Westside in recent memory.
The real estate firm, known for apartment and condo developments, has the site under contract. It recently submitted a rezoning application to the city of Atlanta.
Its plans will also be reviewed by Atlanta Regional Commission and state agencies as a development of regional impact. The project, which would feature multiple phases and take several years to complete, may also include up to 176,000 square feet of office space, townhouses and restaurants.
In coming weeks, Wood Partners plans to begin meeting informally with neighborhoods. There’s no indication when the firm may complete the deal to purchase the property.
Westside neighborhoods surrounding the park and quarry are poised for major changes over the next decade.
The catalyst is the long-term plan for the park, which will feature an overlook providing scenic views of the quarry-turned-reservoir and the Atlanta skyline.
Work began in September 2016 to convert the quarry into a reservoir. The city recently unveiled a $26.5 million first phase of the project.
Once completed, it will be the largest park in the city, 100 acres larger than Piedmont Park.
Last year, 100 acres around the park and quarry was pitched as a possible contender to land Amazon’s $5 billion second headquarters. The proposal included land along West Marietta Street and a possible expansion on Donald Lee Hollowell Parkway.
Over the next few years, it will be interesting to watch how such a large infusion of investment into areas of the Westside is balanced with ongoing questions surrounding affordability.