Crain’s Detroit Business
The Southfield Town Center, the second largest office complex in metro Detroit, officially has a new owner.
New York City-based 601W Cos. closed on the $177.5 million purchase of the 2.2 million-square-foot office complex late Friday, said Michael Silberberg, principal of 601W.
The company plans to spend $40 million to $50 million on renovations and contracts at the complex, located north of 10 Mile Road between M-10 and Evergreen Road, Silberberg said.
Improvements at the Class A office complex are expected to begin in the next 60 to 90 days, he said.
Many of the improvements on things like lobbies and elevators will be focused on the building at 3000 Tower Drive, Silberberg said.
“We’ll be going in there over the next couple weeks or months and putting together a comprehensive plan,” he said.
“Our goal is to turn it into an A+ complex. We are pleased with the market, the prospects, and we hope we can be successful as we have been in other cities and with other assets.”
For example, the company purchased the 2.3 million-square-foot Starrett-Lehigh Building in New York for $151.5 million in 1998, revitalized it and sold it after 13 years for $920 million. The Starrett-Lehigh, constructed in the late 1920s, is on the west edge of Manhattan and had rents at $5 per square foot. When it was sold in 2011, rents were in the $40 range per square foot.
It also made $90 million selling a 1.6 million-square-foot building on West Chicago Avenue in Chicago after purchasing it for $300 million. In addition, it purchased a 331,000-square-foot building on Pennsylvania Avenue in Washington, D.C., for $156.4 million and then sold it for $220 million.
Fellow 601W Principal Mark Karasick told Crain’s in March that 601W’s ownership of the Southfield Town Center is expected to be brief, about 3-5 years. That’s common for the company, which has 14 million square feet of commercial real estate under ownership or management across the country in major cities like New York, Washington, D.C. and Chicago. About half of the company’s portfolio is in Chicago.
The largest tenants in the Southfield Town Center are GlobalHue Inc., with 109,000 square feet; Fifth Third Bank, 106,000 square feet; and AlixPartners LLP, 63,000 square feet, according to Washington, D.C.-based real estate information service CoStar Group Inc.
The average rents at the 1000 and 2000 towers of the Town Center are $22.90 per square foot. The average rents at 3000, 4000 and 4400 Town Center are $21.90 per square foot.
The investors are buying all five office towers at the complex but not the 5000 Town Center residential tower or the Westin Southfield Detroit.
According to commercial mortgage-backed securities data from Bloomberg LP, the previous owner, New York City-based Blackstone Group LP, was in default on its mortgage, unable to pay the balance due on a $235 million loan on the property originated in 2004 by Irving, Calif.-based Greenwich Capital Financial Products Inc.
A loan modification letter originally stipulated that Blackstone pay the balance by Nov. 5, 2012. The complex was appraised last summer at $177.5 million, 45 percent below a 2004 appraisal of $321 million, according to Bloomberg loan data.
The loan was transferred to Wells Fargo Bank NA for special servicing.
Pittsburgh-based HFF Inc. marketed the complex and hired Southfield-based NAI Farbman to represent Blackstone locally in the sale. The Southfield office of CBRE Inc. is responsible for leasing the property.
The Southfield Town Center is the second largest in the region, behind the 5.5 million-square-footRenaissance Center in Detroit.
Silberberg said that while 601W isn’t currently pursuing other purchases in the Detroit market, the company would consider it.
“Over the last several months, we have gotten extremely comfortable with the Detroit market, particularly the suburban market and the renaissance it is experiencing. We will definitely come back.”