Pittsburgh Business Times - by Tim Schooley
If there’s one thing Gary Horwitz, president of Los Angeles-based Hertz Investment Group, wants to make clear about his company’s plans to sell the 1.5 million-square-foot Gateway Center Downtown, it’s this: They’re not selling because they have to.
“It’s not a distressed sale. We’re selling this because we think it is the right time,” he said, adding the company is considering purchasing other property in town. “I think it will be a good investment, and I think it will encourage us to invest in other properties in Pittsburgh.”
For reasons all their own, Downtown has seen a number of significant properties go up for sale recently.
Unlike five or six years ago, when local brokerage professionals were describing the market as the worst in 30 years, Pittsburgh’s commercial real estate sector today is outperforming a national market that continues to struggle.
Property owners such as Hertz are seeking to capitalize on that position.
In addition to Gateway Center’s potential, Hertz’s commercial brokers — the Los Angeles office of Grubb & Ellis — are marketing the strength of Pittsburgh and its Downtown, which includes a low 7.6 percent vacancy rate for Class A office property, a top-five ranking for overall real estate market performance, a mix of Fortune 500 companies and an emerging energy sector.
Not far from Gateway Center, the Southwestern Pennsylvania chapter of the American Red Cross acknowledged this week it is working to hire a commercial real estate firm to put its Downtown office building up for sale and to help it find new property in which to operate. The Red Cross expects to choose a brokerage firm in the next few weeks and put its four-story, 38,000-square-foot headquarters building on the market soon after, said Brian Knavish, the organization’s director of media relations.
Both properties join the Oliver Building; EQT Plaza, formerly known as Dominion Tower; and the Regional Enterprise Tower among major Downtown buildings recently marketed for sale.
“Everything is up for sale Downtown now,” said Ned Doran, an executive vice president with GVA Oxford.
EYES ON HERTZ
The local real estate community will watch closely to see if Hertz, which bought the property in 2004 from TrizecHahn Corp., can turn a profit on the sale of Gateway. The company paid $55 million for the property and invested another $8 million in upgrades.
Stephen Blank, a senior fellow at the Urban Land Institute who follows real estate capital markets and investment, said commercial real estate values remain down, by some estimates nearly 40 percent.
“Values are clearly down peak to trough from 2007 to the end of 2009,” he said.
That trend, coupled with more stringent financing terms, poses challenges for sellers, Blank said. At the same time, he sees improvements in the overall market and a lot of capital on the sidelines.
Dan Puntil, a senior vice president who manages the office of Grandbridge Real Estate Capital, said the national investment community is beginning to consider Pittsburgh in ways it hasn’t before.
“There’s a lot of people out there looking for real estate deals right now,” Puntil said. “Pittsburgh has always been somewhat overlooked by the investment community. Lately, there are some people coming into the market.”
Horwitz sees that as the case. He said the company decided to put the property on the market after it generated a strong number of inquiries.
“The motivating factor is we’re a national real estate company. We operate in 12 markets throughout the United States, and Pittsburgh has consistently been the strongest of those markets,” he said. “We’re really reacting to consistent requests of inquiry for Gateway Center.”
NAI Pittsburgh Commercial is a Pittsburgh proud locally owned and operated company. To see some of the investment and development opportunities available in the Pittsburgh region click here.
- ► 2011 (46)
- ▼ 2010 (77)