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Hartford's Connecticut River Plaza Complex On The Auction Block

By Kenneth R. Gosselin

March 02, 2010

Prime commercial real estate along the Connecticut River in downtown Hartford is for sale.

And the owners are extremely motivated.

The two-building Connecticut River Plaza at 450 Columbus Blvd. is up for auction by the limited partnership that has owned the 575,000-square-foot complex virtually since it was built in 1984 by former Whalers owner Richard Gordon.

The property isn't in foreclosure. In fact, the mortgage will be paid off later this year.

What will be on the block is essentially an empty complex that likely will go at a bargain price, now that its major tenant, UnitedHealthcare, is moving later this year to CityPlace.

So why sell now?

Jones Lang LaSalle, the commercial real estate firm representing the partnership, declined to comment on the reasons for the sale. But a person familiar with the partnership's thinking said the imminent end of the 25-year "master lease," currently held by Citigroup, is pivotal.

While there was the master lease, the partnership Connecticut River Plaza Trust was guaranteed a steady stream of income. The master lease covers the entire property, and whether or not the space is occupied, lease payments were paid.

Now, the trust would have to market the property and seek new tenants, especially now that a sublease arrangement with UnitedHealthcare is ending, the person said.

Jones Lang LaSalle declined to identify the members of the partnership. But an offering circular obtained by The Courant when the property was for sale in 2007 identified affiliates of GE Capital, Chrysler Realvest and Shell Oil as owning the trust's beneficial interests.

Empty buildings typically sell for less because there are no paying tenants.

The price the complex would fetch at auction, though, doesn't appear to be an issue for the owners. It wasn't clear if they had set a minimum price.

The sealed-bid auction, which ends Thursday, has been highly publicized, even in local general readership newspapers. An auction or the publicity likely would not have happened before the recession. Word would have been put out more quietly to investors.

"It is a bit unusual," said Jay Wamester, a broker at Colliers Dow & Condon in Hartford. "They are really promoting this auction."

The sale, however, could provide a rare opportunity for a buyer to get what is considered a prime, Class A complex at a cheap price.

Shawn McMahon, an executive at Jones Lang LaSalle in Hartford, said the complex has an enviable location on the Connecticut River and the complex is prime, Class A space. It also is visible from I-91 and I-84.

"We think of it as a landmark for Hartford," McMahon said.

McMahon said it could attract interest from investors and companies that might want to occupy the space themselves.

Local commercial real estate experts say it is difficult to gauge what the complex might fetch at auction, though one thing is for sure: It will be at a deep discount.

"It will set the floor for the lowest value for what a Class A office building will sell in downtown Hartford," said Patrick Mulready, a broker at CB Richard Ellis, a commercial real estate services firm in Hartford.

The last major office building to sell in the city's central business district was another two-towered office building at 100 Pearl St. in 2008. New Boston Fund sold that building for $18 million, or $64 a square foot, about half of the $32.7 million New Boston paid in 1999. The building had a 35 percent occupancy at the time.

Financing commercial real estate purchases remains difficult, though some investors are beginning to get back into the market.

Still, if someone can pay cash, there potentially could be "a big upside" in the purchase, if the right tenant or tenants can be found, said Dale Reese, a senior Connecticut executive at New Boston.

But a strong stomach will be required, given that available office space in Greater Hartford increased to 21.2 percent as of Dec. 31, up from 18.2 percent a year ago, according to CB Richard Ellis.

A recent CB Richard Ellis forecast calls for another increase this year, to 23 percent.

Reese said a successful sale won't mean that Hartford or the surrounding area is "back," but will "signify that there is someone out there who is willing to make a big bet."

Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
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