Gateway Center owner confirms complex is for sale
More than 100 prospective buyers have expressed interest in purchasing a Downtown office complex that was the face of Pittsburgh’s first Renaissance 60 years ago, one of the owners said.
California-based Hertz Investment Group confirmed on Tuesday that it intends to sell the four buildings and parking garage it owns in Gateway Center at the tip of the Golden Triangle.
“There’s been a huge amount of interest in it,” said Gary S. Horwitz, Hertz’s president and CFO. “Over 100 people have asked for information on it.”
Jeremy Kronman, executive vice president of commercial real estate broker CBRE Inc., said the response is not surprising, given Pittsburgh’s healthy commercial real estate market.
The overall occupancy rate for office space across the city is 90.5 percent, third highest among the country’s top 50 metro areas during the first quarter of this year, according to CBRE’s most recent market report. Office space is leasing for $20.07 per square foot on average, a 7.8 percent increase over the same period last year.
“We have a well-balanced demand (and) supply. We’re in a stable market. We don’t have any one industry that dominates our regional economic landscape,” Kronman said. “So we’re relatively low risk. That project is at a very prominent location at the Point, and location is a key (aspect) of real estate.”
The complex consists of skyscrapers known as Buildings One, Two, Three and Four and the 750-vehicle underground garage on Liberty Avenue near Building Four. Kronman ranked Buildings One, Two and Three as “quality” Class B office space and ranked Building Four as just below Class A. Major tenants include Dollar Bank, Gateway Health Plan and KDKA.
Hertz did not list a sale price.
“We’ll leave that up to the market,” Horwitz said. “In most commercial transactions, there’s not an asking price. We’ll see what it can trade for when we see all the offers.”
He said the property, which is 88 percent leased, is listed with Chicago-based Jones Lang LaSalle. He expects to begin seeing offers during the first week of September.
Jeremy Waldrup, president and CEO of the Pittsburgh Downtown Partnership, said new owners are likely to maintain an office complex in Gateway Center.
“I think you would have to really sit down and see if it would make sense to put residential there,” he said.
But a conversion to residential would be a success, he added, noting the close proximity to Point State Park, Market Square restaurants and parking garages.
“It has it all,” Waldrup said.
Horwitz estimated that Hertz has invested more than $20 million in building upgrades during 10 years, including $4 million recently in the lobby of Building Four and ground floor space occupied by an Eddie Merlot’s restaurant.
The total assessed value of the four buildings is $76 million, according to the Allegheny County real estate website. The garage is assessed at $7 million.
This is the third time Hertz has marketed the complex since purchasing it for $55 million in December 2004.
Horwitz said Hertz typically sells its real estate after owning it for five to 10 years and that timing was right with Downtown office space at a premium.
Kevin Acklin, chief of staff for Mayor Bill Peduto, said new investment Downtown would complement other major projects under way.
This year officials estimated the value of ongoing projects Downtown at more than $770 million, including renovations of buildings along Wood Street and skyscrapers such as the Gardens at Market Square hotel and PNC office tower on Forbes Avenue.
Bob Bauder is a Trib Total Media staff writer. Reach him at 412-765-2312 or [email protected].