With Downtown vacancy in the single digits, Equity Office also had been planning to break ground this year, but only if it first landed an anchor tenant for the building. Shorenstein is prepared to start the project without any signed tenants and deliver it two years from now, company EVP Charlie Malet tells GlobeSt.com. Annual full service asking rents will be north of $30 per sf, he says.
"All the governmental approvals are in place," Malet says. "It's pretty much teed up and ready to go."Branded as First & Main by Equity Office for the intersection it will front, the office building was in jeopardy last year after Multnomah County threatened condemnation in order to build a courthouse on the site, which sits adjacent to Justice Center at the west end of the Hawthorne Bridge. Instead, the county is now talking with Shorenstein about providing access beneath the new building to a county-owned development site one block away such that prisoners could be shuttled back and forth securely.
Shorenstein also is moving forward with development on two suburban sites that were included in the Portland portfolio acquisition. The sites are located 10 miles south of Downtown Portland in the tight Kruse Way submarket, where Shorenstein now enjoys, as Equity Office did, an 85% market share. Shorenstein's local senior vice president Matt Cole tells GlobeSt.com that one site is pre-approved for a five-story, 110,000-sf office building called Kruse Oaks III and the other is pre-approved for a four-story, 90,000-sf building called Kruse Oaks IV. Malet says the plan is to start construction this year and complete the buildings 18 months later.
All told, Shorenstein acquired 46 buildings and the three development parcels from Blackstone, which acquired Equity Office in February for $39 billion in cash and debt and immediately began selling it off in smaller chunks by market. First reported by GlobeSt.com in mid-February, the Portland deal is the largest in the history of the city. It is also the largest-ever acquisition for Shorenstein, which sponsors a series of closed-end funds. The Portland portfolio was acquired on behalf of its eighth investment fund, formed last year with $1.1 billion in committed capital, including $100 million from Shorenstein. The sale closed escrow at the end of March.
In addition to Kruse Way, the portfolio includes Congress Center (23 stories, 363,000 sf), Umpqua Bank Plaza (19 stories, 270,000 sf) in Downtown Portland; Lincoln Center, a seven-building, 735,000-sf class A office park across Interstate 5 from Kruse Way in Tigard; Nimbus Corporate Center, a 17-building, 690,000-sf flex-office campus in Beaverton; and four buildings in the John's Landing submarket immediately south of Downtown Portland, including River Forum I & II and RiverSide Center.
As of the end of the 2006, Equity Office's Portland portfolio was 92.2% leased and the average annualized rent per sf was $23.00. Individual building occupancies ranged from 73.5% (Kruse Oaks I) to 100% (4004 Kruse Way Place, Kruse Woods V, 5550 Macadam). The average rental rate range was $15.79 (Nimbus Corporate Center) to $30.23 (Kruse Woods V).
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