Highwoods Picks Up Pittsburgh’s PPG Place for $214.1M
- Sep 20, 2011
September 20, 2011
By Barbra Murray, Contributing Editor
Talk about making a grand entrance. Highwoods Properties Inc. has made its debut in the Pittsburgh office market with the acquisition of PPG Place, the 1.5 million-square-foot trophy office complex commonly referred to as the crown jewel of the Pittsburgh skyline. Highwoods purchased the property for $214.1 million, snapping it up from Market Associates L.P., an affiliate of The Hillman Co., which had owned the building since acquiring it in 1999 for approximately $180 million.
Occupying approximately four acres across three city blocks in Pittsburgh’s central business district, PPG Place first opened its doors in 1984 as the global headquarters of PPG Industries Inc. The property encompasses six premier office buildings ranging in size from 37,000 square feet to 900,000 square feet, structured parking and a host of amenities, including restaurant and retail space, a conference center, an ice rink, the Wintergarden and structured parking.
The tenant roster at the complex reads like a who’s who of the business world, featuring such names as Deloitte & Touche, Ernst & Young, H.J. Heinz, Morgan Stanley and the property’s original tenant, PPG Industries, which maintains its headquarters mainly in the 40-story PPG One building, the largest of the six.
The ultimate price tag on PPG Place includes Highwoods’ assumption of existing debt totaling $124.9 million with a 4.27 percent interest rate and a maturity date in November 2017, as well as $17.1 million of scheduled building improvements and $8.1 million of future tenant improvements as dictated by current lease agreements.
It was quite a deal for Highwoods, which, with an investment that amounts to $139 per-square-foot, grabbed the coveted asset for, as the company describes in a press release, “well under half of estimated replacement cost.”
And there are more benefits for Highwoods beyond the attractive acquisition cost. Presently 81.2 percent leased, PPG Place offers the opportunity for the new owner to capitalize on rising rents. The average asking rate for Class A office space in Pittsburgh increased $0.10 in the second quarter to $22.57 per square foot, according to a report by commercial real estate services firm CB Richard Ellis, which Highwoods has tapped to spearhead leasing. Rates for Class A office properties have either gone on the upswing or remained steady since the first quarter of 2010. “The rates have continued to increase, while the vacancy rates continue to decrease,” the report notes. “This trend will likely continue, as space becomes even more limited, giving the owners/landlord more power in lease negotiations.”