Landmark Office Building Trades for $46 Per SF

DAYTON, OH-The largest and tallest office building here has changed hands for $46 per sf. New York City-based investor Uri Mermelstein paid about $21.4 million for the 30-story, 461,268-sf steel and glass building known as Kettering Tower. The seller was a trust of local philanthropist Virginia Kettering, who died last year. Sale proceeds are going to the Virginia Kettering Foundation.The property is located at Second and Main streets and is 83% occupied. The building’s largest tenant is Bank One, which was acquired last year by JPMorgan Chase and may be consolidating operations. Other significant tenants include Merrill Lynch, Legg Mason, Robbins & Myers, and PricewaterhouseCoopers. The building has 11 main elevators and four escalators. Mermelstein reportedly plans a $1-million renovation of the building that will include remodeling the lobby and elevators as well as putting on a new roof. Carlton Advisory Services provided $21 million in floating rate, Libor-based financing for the acquisition and renovation, saying the amount was 88% of the total cost of the endeavor. Given that, Mermelstein’s overall investment in the asset will be about $24 million or about $52 per sf. “Tenant retention and lease up is their challenge here,” says Neil Bane, an executive with Carlton Advisory Services. In addition to Bank One possibly vacating its space, Bane says one of the restaurants now operating in the building was not paying rent to the previous owner. Having said that, Bane says Mermelstein has 15 years experience identifying and acquiring trophy assets in secondary and tertiary locations and managing them exceedingly well. “In this particular case, he feels he’s found a jewel in the rough; he feels the asset has been under managed and under leased and that he will be able to not only retain tenants but also fill it up,” Bane says. “And given the price at which they were able to buy it, they should have an advantage over other building owners that came into the market at a higher price point.”