The Gold Building and 100 Pearl Street are two downtown Hartford office buildings that sit just yards from each other. But their financial situations are much farther apart than that.
Both buildings are emblematic of the city’s business core. Both were acquired by investors with the goal of big capital gains. Both were recently put on the market for sale, and both were also quickly taken off the market. But that’s about where their stories end.
Because while the Gold Building seems to be living up to its name with Fortune 500 tenants and new long-term leases, 100 Pearl is watching its floors slowly drain dry.
The Gold Building is nearing full occupancy at this point, with The Travelers taking thousands of square feet of space, and United Technologies Corp. recently renewing its lease for seven more years. Across the street, 100 Pearl recently learned that it’s losing anchor tenant PricewaterhouseCoopers to CityPlace I in 2008.
Building Fortunes
And yet, brokers and building owners say both properties are probably about as best poised in the marketplace as they can be.
The two buildings – 100 Pearl St. and One Financial Plaza – were each yanked from the sales block in part because of leasing issues. One Financial Plaza’s owners said they were busy trying to score another big tenant; 100 Pearl’s owners took it off the market to hunt for more tenants to fill the buildings’ gaps and have a more desirable product to sell.
Taking a building off the market would be a giant red flag in residential real estate, but Hartford commercial real estate professionals say it doesn’t necessarily mean trouble for a large commercial property.
“From a broker’s perspective, those aren’t scarlet letters on our market at all,” said Joel Grieco, senior director for Cushman and Wakefield of Connecticut. Most brokers and potential buyers aren’t skittish in the wake of a move like that, he said.
Michael Grunberg of Grunberg Realty said the two buildings’ situations aren’t a reflection of the city.
“These were two perfect examples of two different stories,” he said. “The market is strong – the market is very good.”
Refinancing Complete
The building at 100 Pearl St. went off the market in January, said Bill Fenn, vice president of asset management with owner New Boston Fund, because owners were looking for new tenants. Out of 281,000 square feet, 77,000 is available to rent and more on the way as PricewaterhouseCoopers moves to pull up stakes on its 50,000 square feet and head to CityPlace.
New Boston had met with a potential buyer, Fenn said, but didn’t close and took the building off the market. With a refinancing due this summer, New Boston re-mortgaged the building for just under $25 million in May and has no plans to put 100 Pearl back on the market until it can shore up new tenants.
Grunberg and other real estate professionals said 100 Pearl was originally part of a package deal, to be sold with two other commercial properties – one in East Hartford, another in Rocky Hill. Those two buildings were sold off individually, leaving 100 Pearl, which wasn’t a strong seller with all its vacancies.
One Financial Plaza, commonly known as the Gold Building, tells the opposite story. Put on the market about a year ago, Martin Kane, senior vice president of Talcott Realty Investors, said the company subsequently heard that The Travelers insurance company was hunting for a new landlord. Kane said Talcott pulled the Gold Building off the market in the spring of 2006 to respond to Travelers’ request for proposal. Talcott closed that deal in August, and Travelers moved in last January.
Kane said the firm held off on putting the Gold Building back on the market because Travelers decided to expand its occupancy, leaving only 4 percent of the building vacant.
Seeking to increase the building’s value even further, Talcott began talks with tenant United Technologies Corp. to renew its lease, then set to expire in 2009.
Those talks paid off in early June, as UTC agreed to renew its lease two years early – now the major tenant will stay until 2014, Kane said.
Back Again
Larry Levere, director of office leasing with Hartford’s Sentry Commercial Real Estate Services, said he expects the Gold Building to go on the market very soon thanks to its low vacancy rates. And despite 100 Pearl’s search for tenants, Levere agreed that Hartford isn’t begging for buyers.
“I don’t think there’s a shortage of buyers at all,” he said, pointing to the recent sales of State House Square this year, as well as 20 Church Street and the former Connecticut Mutual Building at 699 Middle Street in Asylum Hill.
Nicolas Morizio, president of Colliers Dow & Condon, agreed that taking a building off the market doesn’t have the same effect as, say, a residential real estate sale.
Homes are purchases of emotion, he said, but most potential buyers understand that commercial deals operate differently.
But more recently, higher interest rates have likely dampened selling efforts.
Sellers “are trying to get more income to justify their prices,” Morizio said; since more tenants mean more income, anyone interested in selling is focused hard on filling up gaps.
Ronald Eddy, president of the Hartford chapter of the Building Owner and Manager’s Association, said downtown struggles with longer-term issues as well. Rental rates downtown have been stagnant for about 20 years, whereas suburban properties can attract tenants with lower rental rates and amenities such as parking. Buyers have a wide field of options to choose from, he said, and downtown might not have enough of an edge over attractive suburban locations.
