Calif. group buys KOIN Center
$108 million sale - The deal includes two other sites for potential office and residential development
Wednesday, July 04, 2007
DYLAN RIVERA
The Oregonian
The KOIN Center, Oregon's third-tallest building, has been sold for $108 million to a California investment group.
The price, likely to be in the top three commercial real estate deals in the state this year, will give CommonWealth Partners of Los Angeles office and retail space on the bottom 19 floors of the 30-story downtown Portland tower, a one-block site for an office high-rise just to the east, and a half-block site for a residential high-rise just to the north.
Forty-four condominiums on the upper 11 floors are not included in the sale.
The private equity group bought the property on behalf of the California Public Employees' Retirement System, its biggest client. The deal is a first Oregon office building purchase for the pair, and one that could be the first of many, said Michael Croft, chief executive of CommonWealth.
"What really drives our business is job creation and that relates back to things like quality of life, cost of living, things of that nature," Croft said. "We feel that Portland is a very strong market, and we believe it will improve in the future pretty significantly."
The acquisition marks the exit of a large real estate investor from Portland and the entrance of a new, perhaps more daring, developer.
Louis Dreyfus Property Group of New York bought the nine-year-old tower in 1993 in a partnership with Benenson Capital Co., also of New York, from the KOIN's original owner. It was the first Portland-area purchase for Dreyfus, and the company continued to grow its local presence through the 1990s.
The original Dreyfus purchase included three blocks that remain linked today. A block to the north of the KOIN includes a half-block building known as City Heights Apartments. Dreyfus sold the apartments in 1995 for $15 million, and they resold several times since, most recently late last year for $39.7 million.
On the eastern half of the City Heights block sits the former headquarters of the Pendleton Woolen Mills, at 218 S.W. Jefferson St., a long-vacant, low-slung building that CommonWealth says could be replaced one day with a residential tower.
The sale to CommonWealth and CalPERS, which closed June 21, leaves Dreyfus with no holdings in the Portland area. The company's commercial real estate activity is focused on the New York and Washington D.C. markets, said Jeffrey Sussman, president of Louis Dreyfus Property Group.
"We've enjoyed the ownership since 1993, we just felt it was an appropriate time," Sussman said. "We loved Portland, a terrific place to do business."
The KOIN sale signals investor demand for trophy office buildings remains strong in Portland. It also includes a potential new building that could change the Portland office market.
The price paid for the 324,000 square feet of office space, in the high $200-a-square-foot range, is shy of the record set by the ODS Tower of $309 a square foot in 2005. But ODS was far newer and in a more bustling part of downtown.
"That's a great price for that building," John Kohnstamm, a commercial broker with Capacity Commercial Group, said of the KOIN. "That building has always been fairly solid and well run."
CommonWealth will soon evaluate whether to start construction of 100 Columbia, an office high-rise first proposed in 2000, Croft said. The company says if there's enough demand, it could start without an anchor tenant precommitted, as two other developers have already announced they would on other downtown towers. But either way, it will develop with Earth-friendly standards that CalPERS policies encourage and Portland office tenants seem to appreciate, Croft said.
"We think the people of Portland care about that more than other places," Croft said.
Jeff Weber, Russ Cooper and Stephen Van Dusen of Eastdil Secured in San Francisco represented the sellers. CommonWealth represented itself.
Dylan Rivera: 503-221-8532;
dylanrivera@news.oregonian.com
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