Acquisition and Investment
By Andrew Johnson
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July 2, 2007
The Arizona Republic
PHOENIX, AZ - A Spokane, Wash - based real estate investment firm has paid $69.25 million for a 26-story office tower on Central Avenue, the second such transaction to occur in Phoenix's Central Corridor in the last month.
Crown West Realty LLC bought Phoenix Corporate Tower, 3003 N. Central Ave., from San Francisco-based Krausz Co. Inc.
"That is truly a strong statement not just for the (central business district) but for all of Arizona, that you have institutional investors looking in what was once a lagging market," said Charles Miscio, first vice president with CB Richard Ellis' Phoenix office, and broker of the deal.
Krausz, which bought the building in 1990, according to Maricopa County property records, made a $40.6 million profit on the sale, Miscio said.
The sale closed last week, he added.
In early June, real estate investment firms from California and Colorado paid $70.3 million for Great American Tower, a 24-story office building at 3200 N. Central Ave. The tower is only two-blocks from the property that just sold.
Recent sales in the Central Corridor show potential for resurgence in an office market that has historically lagged behind the Camelback Corridor, Scottsdale Airpark and downtown Phoenix markets in terms of rental rates, occupancy and overall activity.
The corridor still faces roadblocks in lifting occupancy rates, Miscio said, including light-rail construction and a lack of retail and housing.
"It's still a 9-to-5 workplace," he said. "Not many people are living, entertaining and playing within the (central business district) market, which in my opinion will change."
The price Crown West Realty paid for Phoenix Corporate Tower - which was 85.5 percent leased at the time of the sale - represents a rental rate of about $25 per square foot, Miscio said.
Newly released data from Cushman & Wakefield of Arizona Inc. shows the average rental rate in midtown Phoenix's office market to be $23.12 per square foot.
The 445,811-square-foot building's anchor tenant is the law firm Fennemore Craig PC, which occupies about 128,000 square feet, Miscio said.
Krausz invested about $30 million in the tower while it owned the building, including adding about 62,000 square feet by converting exterior balconies into interior space, Miscio said.
Crown West Realty plans to add retail space to the building's first floor and turn some of the vacant space into smaller office suites, said Bob Olshan, vice president of Crown West Realty.