Atlanta’s biggest office landlord is doing more than talk about the flight to quality in its hometown — and it’s bringing an out-of-towner along for the ride.
Cousins Properties partnered with New York-based investor Town Lane to pony up $83 million in cash for the 24-story, 520,000-square-foot Proscenium office building, at 1170 Peachtree Street Northeast in the Midtown district of Atlanta. The price, which comes to $160 per square foot, is about 30 percent less than the trophy tower commanded 20 years ago, the Atlanta Business Chronicle reported.
Construction costs on trophy towers in Atlanta’s central area can run about $750 per square foot, the outlet previously reported. The investors’ bargain for the building at 14th and Peachtree, near Colony Square, comes shortly after the Atlanta-based Cousins touted its hometown and other Sun Belt markets as ripe for investments in high-end office properties.
Town Lane is an “opportunistic real estate” investor recently founded by former Blackstone executive Tyler Henritze and his sister, Parker Morse, formerly at principal at Sycamore Partners. Town Lane paid for an 80 percent stake in the Proscenium building from its inaugural fund, which completed a $1.25 billion fundraising round in May.
Henritze echoed the cheery outlook that Cousins CEO Colin Connolly gave on his publicly traded firm’s recent earnings call last week.
“Doing an office deal in 2024 may seem contrarian,” Henritze told the outlet. “We think it makes all the sense in the world.”
Toronto-based insurer Manulife Financial Corporation sold the Proscenium building. It paid $118 million for the property in 2004 through its John Hancock subsidiary.
John Hancock transferred the building to a fellow Manulife subsidiary in 2017, listing a value of $146 million and taking a $65 million loan against it from JPMorganChase. The loan would have matured this June but got an extension for a $17 million fee, Bisnow reported.
Manulife’s sale of the property comes a few months after it said it has seen a drop of 40 percent in the value of office properties across the U.S. Scott Hartz, chief investment officer of the insurer, said it has cut office properties down to 10 percent of its long-term real estate portfolio, from 40 percent, and flagged the office sector as the weakest point of the commercial property segment in North America.
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The Proscenium building is 74 percent leased, about in line with recent averages for the Atlanta metro office market. Rents in the Midtown District have nonetheless risen lately to about $45 per square foot, with activity for large leases at Class A properties getting back to a pre-pandemic pace, according to Savills.
Atlanta has meanwhile seen construction of new office space dip to historic lows, with just 170,000 or so square feet in the works, according to CoStar.