When the downtown Hartford Class A office towers at Connecticut River Plaza sold for $6.7 million last year to FBE Limited and Cammeby’s International, it was a sign the city’s commercial real estate market was in rough shape.
Things haven’t improved much since then with vacancy rates hovering around the 30 percent mark. Several downtown office towers remain completely vacant, including Connecticut River plaza.
But that’s not scaring away the building’s new owners. In fact, FBE Limited and Cammeby’s International are doubling down on their downtown Hartford bet.
The New York-based privately owned real estate firms are in the midst of an $8.5 million renovation of the 556,000-square-foot office complex that will include an elevator modernization, new lobby and common areas, retrofitted lighting, a new central energy plant, and other mechanical and structural upgrades.
Construction on the complex is already underway and the makeover could be done by the end of first quarter 2012.
By next summer, the group of investors will have spent $27 million on the complex, including the original purchase price, renovations and operating costs.
Dovy Fruchthandler, FBE Limited’s vice president and asset manager, said the investment aims to modernize and restore the building to its Class A status so it will attract tenants in a competitive market.
The ultimate goal, Fruchthandler said, is to land a major corporate tenant currently outside the city in order to breathe new life into downtown.
“We’d love to attract a company from outside the central business district of Hartford,” Fruchthandler said. “We do believe that this city has a lot to offer and there is opportunity for growth. Hartford could serve as a cultural center for the suburbs.”
Of course, landing a new corporate tenant, particularly one that is not already downtown, will be no easy task.
Fruchthandler said he recognizes there is a stigma about Hartford and operating costs and taxes can be a hurdle. FBE Limited, for example, is paying about $6 million a year in taxes and operating expenses on Connecticut River Plaza.
Parking can be an issue downtown as well, but FBE Limited is attempting to turn that weakness into strength by offering 1.5 free parking spaces to tenants per 1,000 square feet of leased space.
With an 800-space parking garage, Fruchthandler said the offer gives Connecticut River Plaza a significant competitive advantage in the marketplace.
Shawn McMahon, a broker for Jones Lang LaSalle, which is marketing the complex, said the firm is “actively pursuing all prospects for the buildings.”
“We are talking to a lot of potential tenants,” he said, adding that they likely will not get a lease signed until after the renovations are complete.
FBE Limited and Cammeby’s International bought the office complex in July 2010, shortly after its largest tenant, UnitedHealthcare, vacated the building to take up space in CityPlace I. Travelers, the buildings only remaining tenant at the time, left a short time later.
The pink-tinted complex includes two buildings: a north tower that stands 15 stories high and an 11-story south tower.
The $6.7 million price tag, or $12 a square foot, was a near record low sales price for the downtown office market. Fruchthandler said that was the true value of the building at the time because it had no long-term tenants and needed upgrades.
Fruchthandler said the investors are paying cash for the renovations that will include a new elevator system installed by Otis elevator, which will have a compass destination management system that will improve passenger travel times.
Sarracco Mechanical Services Inc. has been contracted to install a new energy efficient, central plant that will generate steam and chilled water for the complex. The new plant will allow the building to get off the city’s steam and water loop, which is expected to provide significant savings.
Fruchthandler said the complex is paying about $1 million a year to operate off the city’s loop, but he estimates the new system will cut that bill down to about $200,000.
The new lobby and common areas are already being worked on. New glass is being installed on the main entrance lobby. A cafeteria will also be part of the complex.
Connecticut River Plaza’s search for tenants comes at a time of great uncertainty in downtown Hartford’s commercial real estate scene. Office vacancy rates have reached as high as 30 percent downtown, as companies have shrunk their real estate footprints during the economic downturn.
But FBE Limited and Cammeby’s International aren’t unfamiliar players to the Hartford market. They teamed up in 2007 to purchase neighboring downtown property State House Square for $97 million.
The firms have had success with that building, which has an occupancy rate over 90 percent.
Fruchthandler said he is optimistic Connecticut River Plaza can reach a similar occupancy rate in a year or two.
