Located at 25 South Arizona Place, the 103,914-sf, class A office building brought $39 per sf or 67% below the estimated $120 per sf replacement cost for the five-story structure. Built in 1988, the building currently is 84% vacant.
"What's exciting is that the price per sf is probably the lowest in all of Arizona for a building in excellent condition. It sets a new low bar for property values in the southeast market," says Chad Carpenter, Equus president. "The vacancy rate is about 30% in the Chandler office market right now, which is one of the reasons why we could buy for such a low price." He tells GlobeSt.com that four leases for a total 10,000 sf are pending. "Things are all of a sudden picking up. We're hoping to find some bigger users for the larger floors," he adds.
Equus plans to invest $300 million in acquisitions during the next two years, staying within the California and Arizona markets. Of that $300 million, the firm has allocated $75 million to Arizona buys. The purchase of the Rocky Mountain Financial Center is part of that allocation.
"The Southeast Phoenix investment market is in a downturn, which is likely to continue over the next 12 months. We expect to see additional properties come available as owners of vacant buildings are unwilling or unable to make their mortgage payments," Carpenter says. Equus already has a couple more properties under contract in the Phoenix market and is close to working out a few other deals.
The firm's investment criteria call for a minimum 100,000 sf for office product and a minimum 200,000 sf for industrial space, all falling within an investment range of $20 million to $70 million. Carpenter says the plan is to "co-invest" private equity with institutional equity. "I'd rather do bigger deals," he says, adding the firm "can actually handle more properties than we have right now."
Equus, acting as property manager, has been offering rental concessions from free rent to free parking and generous TIs, all of which are negotiable. In a market where property values have been so hard hit, Equus also is paying full commission to procuring brokers along with a dollar per sf signing bonus.
Eric Wichterman and Jeff Hartland, both of Grubb & Ellis Co.'s Phoenix office, represented buyer and seller in the transaction. Hartland, along with Laurel Lewis and Chris Krewson of the same office are handling leasing duties for the building.
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