Connecticut River Plaza Sells At Bargain Basement Price
By KENNETH R. GOSSELIN
July 27, 2010
The sale price for an empty office complex on Hartford's riverfront is likely to set a record low for the downtown office market, but the new owners have high hopes for the future with plans to invest millions in renovations.
The two-building Connecticut River Plaza on Columbus Boulevard has been purchased by the owners of State House Square, a major downtown office complex, for $6.7 million, according to the city clerk's records in Hartford.
That is less than $12 a square foot for the 575,000-square-foot complex — an amount even lower than a yearly lease in the city, let alone a sale.
There hasn't been a comparable sale of vacant but prime office building downtown since 1997, when Northland Investment Corp. purchased Metro Center. Northland bought Metro Center for $10.5 million, or $38 a square foot.
Commercial real estate experts said the bargain basement price reflects the reality that it could take two to four years to lease the Connecticut River Plaza. The new owners, FBE Limited and Cammeby's Internationa, can expect to pay up to $6 million a year in expenses to run the building, if tenants are slow to lease.
Shawn McMahon, a commercial real estate broker at Jones Lange LaSalle in Hartford who was involved in the sale, said Tuesday that the new owners saw an opportunity to purchase a building at a good price in the downtown of the state's capital city.
They say they are planning to invest millions in renovations, including refurbished lobbies, a new fitness center and a corporate cafeteria. The deal was announced late Monday.
"They want to bring it up to compete with other Class A office spaces in downtown Hartford," McMahon said.
The major tenant of the pink-colored buildings, UnitedHealthcare, recently relocated to CityPlace, leaving the building nearly empty. The last tenant, Travelers, will be moved out of the building in a week.
The purchase comes at a time when office vacancies in Greater Hartford continue to rise as employers, many of whom have downsized in recent years, remain reluctant to expand their payrolls. In addition, many firms are asking employees to work from home.
John M. McCormick, executive vice president at CB Richard Ellis in Hartford, said the size of the complex could be an asset because blocks of space that large are rare not only in Connecticut but between Boston and New York. The size also could present a challenge, however, if interested tenants are seeking smaller blocks of space, McCormick said.
"The good news is that it is a large block of space," McCormick said. "The bad news is that it's a large block of space."
The new owners purchased State House Square in 2007 and have had success in keeping 95 percent or better of the complex leased. The owners are known as long-term holders of properties and paid cash for Connecticut River Plaza.
The office complex was put on the auction block by the limited partnership that has owned it virtually since it was built in 1984 by former Hartford Whalers owner Richard Gordon. Gordon also was the developer of State House Square.
The auction was timed to the end of a 25-year "master lease" held by Citigroup. While there was a master lease, the former owners — Connecticut River Plaza Trust — were guaranteed a steady stream of income. The master lease covers the entire property, and whether or not the space was occupied, lease payments were paid.
With the end of the lease, the trust, including GE Capital, Chrysler Realvest and Shell Oil, wasn't interested in seeking new tenants.
Reprinted with permission of the Hartford Courant.
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