Franklin Street Sells Pershing Park Plaza In Midtown For 25% Haircut
A New England-based REIT has sold its last Atlanta building, accepting a price $11M below what it paid for the property.
Franklin Street Properties Corp. sold Pershing Park Plaza for $34M this month, the company announced in its third-quarter earnings report Wednesday. The sale price is 25% less than the $45.5M Franklin Street paid for the 160K SF office building in 2016, according to Fulton County property records.
The REIT didn't disclose who bought the nine-story building, at the intersection of Peachtree and West Peachtree streets in Midtown, and records don't yet reflect the sale, which Franklin Street said closed Oct. 23. The Wakefield, Massachusetts-based REIT used $27.4M of the sale proceeds to pay off debt.
Franklin Street CEO George Carter said in the release that the company is looking to sell “select properties when we believe that short to intermediate-term valuation potential has been reached.”
The building served as the Atlanta headquarters for law firm Jones Day, which in 2021 moved to anchor the newly built Building 500 at Colony Square. The move left the building just 12% leased after Jones Day departed, according to a regulatory filing. But Franklin Street quickly replaced Jones Day with law firm Swift, Currie, McGhee & Hiers, which now occupied 101K SF and has its logo emblazoned atop the building.
As of the third quarter, Pershing Park Plaza was 79.8% occupied with average rents of $39.55 per SF, according to Franklin Street's Q3 earnings report. In its 2023 annual report, filed in February, Franklin Street said the building brought in nearly $2M in rental revenue but had $2.3M of operating expenses in 2022.
It is far from the only owner swallowing a loss on an Atlanta office building. Manulife Financial Corp. sold The Proscenium in August for $83.2M, 30% less than it paid for the tower in 2004. Atlanta Property Group sold the 534K SF Ameris Center for $81M in June, 10% less than it paid nine years prior.
Sales in the past year averaged $131 per SF with an average cap rate of 8.2%, a far cry from the sales volumes in 2019, when the average per-SF price was $179 and cap rates were 7.4%, according to a recent Partners Real Estate report.
Marcus & Millichap associate Michael Nolen said discounts are expected with the amount of vacancy and overall concerns about tenant demand with hybrid work models now etched in stone.
“The fundamentals just aren’t there. What supported office 10, 15 years ago isn’t there anymore. We haven’t come back from what changed in Covid,” Nolen said. “Office lease space is just so abundant. It’s like walking in grass — it’s everywhere.”
