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Stockbridge Negotiating to Buy Three Alliance Center for Record Price

San Francisco Firm Expected to Pay Tishman Speyer More Than $500 PSF for New Office Tower
December 13, 2017
A San Francisco investor is poised to acquire the new Three Alliance Center office tower for more than $500 per square foot, sources tell CoStar News. The pricing would surpass the Atlanta market's record for office space of $466 per square foot set earlier this year.

The investor, Stockbridge Capital, is negotiating with New York-based Tishman Speyer to acquire Three Alliance, the 30-story, 506,647-square-foot tower built this year in the Buckhead submarket. At $520 per square foot, the sales price would total more than $263 million.

CoStar Research and local real estate watchers have predicted Three Alliance would be the first office tower to top the $500 per square foot mark. The standing record is $466 per square foot, which Transwestern Investment Group paid in July for 236 Perimeter Center Pky., or Park Center 1. Transwestern paid $275.4 million for the 21-story, 590,926-square-foot build-to-suit for State Farm.

For Stockbridge, adding Three Alliance to its Atlanta portfolio would be a big move. Its current area holdings include the Windward Oaks I and Windward Oaks II office buildings in North Fulton and The Ashford apartment community in Brookhaven.

Tuba Malinowski, Stockbridge fund portfolio manager in Atlanta, said she could not talk about the potential deal for Three Alliance. "Closer to the end of the year, maybe we can comment," she told CoStar News. Tower owner Tishman Speyer referred reporters to Stockbridge.

Tishman Speyer began the development of Three Alliance Center in 2014 amid the current real estate upswing. Its decision to move forward on a speculative basis proved to be the right one, as it landed several major tenants including Global Payments, State Street Global Advisors, Aon and CBRE Group, which is marketing Three Alliance for sale.

Tishman's timing, coupled with a lack of other new Class A office supply in Buckhead, helped it achieve rents of more than $40 per square foot with talk of some final smaller spaces fetching $50. As a result, Tishman will sell the tower at a record price-per-square-foot rate.

The sale will breathe new life into Atlanta's investment sales market, which has fallen off in 2017. The drop in transaction volume aligns with the national trend of slower sales activity as a result of market uncertainty and acknowledgement that the current upcycle in real estate eventually will end. Plus, supply of office buildings on the market is low.

Of the nearly 160 multi-tenant office properties totaling more than 250,000 square feet in metro Atlanta, a large majority already have been sold at least once recently.

"Since 2010, more than 80% of these buildings have been traded at least once, and with a relative trickle of new supply that could drive fresh sales activity, we may be in for a period of flat volume but steady price appreciation," according to the latest CoStar Atlanta Office Market Overview.

Tony Wilbert, Atlanta Market Reporter  CoStar Group   

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