$163M Esplanade Office Towers' Sale Breaks Per SF Record

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PHOENIX-Camelback Esplanade I and II, a pair of trophy towers in the heart of the Valley’s financial district, have sold for $162.5 million to Metropolitan Life Insurance Co. The all-cash deal, breaking down to $310.68 per sf, sets a new Valley record.

New York City-based ING Clarion Partners sold the nearly identical, 11-story towers, boasting a combined 469,587 sf of office space and 52,793 sf of first-floor retail space. The buildings are situated on 3.9 acres near the intersection of Camelback Road and 24th Street.

“From day one, we expected the sales price to eclipse $300 per sf,” says Chris Toci, a senior director with Cushman & Wakefield of Arizona Inc. “For Phoenix, these buildings are as good as it gets so we knew it would command a premium.” Prior to the sale of Esplanade I and II, Gainey Center II in Scottsdale held the record sale price with $257 per sf.

Toci tells GlobeSt.com that Camelback Esplanade I and II received 21 offers. After three rounds of bidding, four prospective buyers squared off for the trophies. The New York City-based MetLife emerged as the winner, beating out a REIT and two pension funds, Toci says, declining to name names. MetLife got the keys to the buildings after just 15 days of due diligence and a 15-day closing period.

Before the acquisition of Camelback Esplanade I and II, MetLife didn’t have a large presence in the Valley. “They had not been really active from a buy standpoint,” Toci says. “These buildings will be their crown jewels for Phoenix.”

According to Toci, investors were attracted to the towers because they cater to smaller tenants, which allows for rent spikes. Moreover, the neighborhood is supply constrained. “There’s only one more piece of land in the area that is zoned for office and its highest and best use is actually residential,” says Toci, who teamed on the sale with C&W’s Brian Ackerman, Jerry Jacobs and Larry Downey.

Positioned at 2425 E. Camelback Rd., the 16-year-old Esplanade I contains 234,743 sf of office space and 26,679 sf of retail space. The retail roster includes Houston’s restaurant and Starbucks. Its sister, Esplanade II, located at 2525 E. Camelback Rd., rose in 1990. It has 234,844 sf of office space and 26,114 sf of retail space, which is leased to the Merc Bar, Guaranty Title, Reliance MedSpa and Wesley’s Jewelers. The towers are linked to a four-story parking garage.

The towers were 97.1% leased at sale time. Toci says roughly 30,000 sf of new or expansion leases were signed in the towers during the three-week final bid process, boosting occupancy from 94%. He says, the new leases were signed at rates ranging from $30 per sf to $32 per sf while some existing leases are in the mid- to high $20 per sf. And, he adds, there’s no near-term roll for the office roster. Lead office tenants include locally based Vestar Development Corp., MCI, Piper Jaffray Cos. and the local law firms of Cohen, Kennedy, Dowd & Quigley and Tiffany & Bosco.

ING Clarion purchased the towers, developed by Opus West Corp., in 1997, for $167 per sf or $87 million. ING Clarion used an in-house team to lease and manage the twins, but MetLife has tapped C&W’s local team of Larry Downey, Jerry Jacobs and Gwen Miller for the assignment.

Camelback Esplanade I and II aren’t the only towers in the complex to recently trade hands. Late last year, 4501 Northpoint LP, a fund managed by Prudential Real Estate Investors of Parsippany, NJ sold Esplanade III for $51 million to Chicago-based Hearn Co. And, GE Asset Management is marketing Esplanade IV and V.

The towers are part of a 22.5-acre mixed-use development that includes a Ritz-Carlton Hotel, AMC Theater complex and 12-story Esplanade Place condominium tower besides the five office towers, all sporting first-floor retail space. According to Toci, the office component is 95% occupied.