Commercial Real Estate and Real estate deals and Real Estate & Retail

Market Tower owners put it up for bid despite tough market

April 21, 2008

The owners of Market Tower--the city's fourth-tallest skyscraper--tried to sell the 31-story building this month but apparently were unable to generate bids that met expectations.

The timing of the sale--at a point when financing large deals is difficult--suggests the owners may be eager to unload the asset. An investment group affiliated with locally based HDG Mansur Capital Group bought the building at 10 W. Market St. in July 2004 for about $80 million. The sale offering did not include an asking price but brokers said the "whisper" price was in the range of $99 million.

The real estate market has cooled considerably since Market Tower sold in 2004 for a scorching $160 per square foot. That's about $10 more per square foot than the city's newest and tallest skyscraper, the 1.1-million-square-foot Chase Tower, fetched that September. Macquarie Office Trust of Australia paid $170.6 million for the Chase building.

In the 2004 Market Tower deal, HDG Mansur and an unidentified investor bought ownership stakes in the building that previously were held by Washington, D.C.-based The Carlyle Group and locally based Mansur Real Estate Services. (HDG Mansur is led by Harold Garrison, a former principal in Mansur Real Estate Services.) HDG, which has its headquarters in Market Tower, would not name the investor, who real estate sources believe is from the Middle East.

Bids on Market Tower were due in early April. The Chicago office of New York-based brokerage firm Cushman & Wakefield handled the sale offering.

In a written statement to IBJ, Garrison acknowledged that declining financial markets have made it tough for buyers to finance acquisitions, hindering the firm's ability to sell the 495,000-square-foot tower.

The 1987 building is 93-percent occupied. Its most recent assessed value for tax purposes is $74 million, an increase of more than 30 percent from the previous assessment.

"We constantly test the market on various assets for the ownership of the properties we manage," Garrison, HDG Mansur's chairman, said in the statement. "At this time, the ownership has not committed to a sale of the asset and believes strongly in the property's continued growth."

In response to follow-up questions, Garrison sent another statement saying the building never had been "approved for sale" by the owners and that "there are not a sufficient number of potential players in the market to induce the kind of interest among multiple buyers that would optimally drive values for the asset."

A top office broker who talked about the potential sale on condition of anonymity said the timing of the offering suggests one of the partners may want to sell out now. Brokers said most owners looking to sell in this down market are facing either tax or financing issues.

"The fact they're putting it on the market now tells me there's some compelling reason to sell it now instead of when the market was in a better condition," the broker said.

Last summer, the owners of another downtown skyscraper--the 28-story M&I Plaza, known at the time as First Indiana Plaza--also tested the market and apparently found a similar lack of interest at their asking price. The owners, New York-based Crown Properties Inc., decided against a sale of the 425,000-square-foot building at the southeast corner of Pennsylvania and Ohio streets.

But the owners might be more motivated to lower their rumored asking price of $60 million--about $140 per square foot--after law firm Bose McKinney & Evans departs for Chase Tower in September. The departure will leave the building about 70 percent vacant. Brokers said last summer's offers for the building were in the $30 million range.

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