ST. LOUIS—REDICO, a national real estate company, just acquired six buildings that form part of the giant CityPlace campus in suburban Creve Coeur, about 17 miles outside of downtown St. Louis. The acquisition includes nearly 900,000-square-feet of class A office and retail. REDICO officials tell GlobeSt.com that the move represents a shift away from a national focus, which brought their Southfield, MI-based company into stiff competition with institutional investors in many coastal markets, and toward a greater presence in the Midwest.
REDICO is not alone in making these moves into secondary markets. The high prices and lower yields now associated with the top coastal regions have also pushed foreign investors to begin buying in cities like Detroit and Nashville, GlobeSt.com has reported.
And the St. Louis metro area has rebounded from the recession, especially the suburban office markets. “Metro unemployment remains at a post-recession low of 6.5%,” noted JLL in a recent report, “while professional and business services posted the highest year-over-year job growth since mid-2011 and financial services employment is as its highest level since 2000.”
“It's very hard to find the type of yields we're looking for in the coastal markets,” says Dale Watchowski, president and chief executive officer, REDICO. “But we are very comfortable with the assets in Midwest. We can drive to any of these markets if we choose to do so.”
Although company officials did not disclose the price they paid for this portion of CityPlace, it was in their “sweetspot,” adds Watchowski. “The sizes of the transactions in the Midwest are in our comfort zone.”
And CityPlace, which sits near the intersection of I-270 and Olive Blvd., had exactly what they were looking for. “The best submarket in the Greater St. Louis area is West County,” which includes the affluent community of Creve Coeur, says Dietrich Knoer, REDICO's chief investment officer. The vacancy rate for class A properties in the neighborhood, for example, recently sank to just 7%. The portion of CityPlace just bought by REDICO is stable and 94% leased.
“We are strategically focusing on markets with a high amenity base,” he says, another Creve Coeur hallmark. “There you can walk right out the door and get lunch. In most other suburban business parks you have to drive some place to get food.” Shared campus amenities include an on-site café, a 5,500-square-foot fitness center, a 144-seat auditorium, a 50-seat training facility, conference rooms and complimentary Wi-Fi.
The company would prefer to build up some scale wherever it makes a buy, and both officials say this probably won't be their last acquisition in the area. “We don't want to end up with one asset in a market,” says Watchowski.
“We're actively looking at other opportunities,” says Knoer. “Now that we've planted the flag, we want to do more.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
