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Lady Celeste

Sold!

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There have been a recent spat of top dollar real estate transactions in the Atlanta skyscraper market. First there was the Pinnacle, then One Atlantic Center for $305 million, then The Bank of America Plaza for $348 per square foot or $436 million in July and now we have 1180 Peachtree being sold for a whopping $380 per sq foot or about $254 million. There seems to be a bullish momentum going in the Atlanta highrise market. While sales of skyscrapers are generally down, these recent sales show that pension funds and other investors see the potential for increases in the value of Atlanta skyscrapers.

That's a very good sign. It will also free up capital for Hines who has it's sights set on several high profile intown developments.

From the article:

Another landmark in Atlanta's skyline has changed owners

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Obviously I'm not a office investor, but it seems people are paying WAY too much for Atlanta office properties (except for Cousins purchase of 191 Peachtree)

While vacancy rates are improving, they are still well above the national averages. The rents, aren't increasing at a great rate, and aren't that high to begin with. 1180 Peachtree probably leases for $35 psf tops, whereas Boston office buildings trading in the same $psf range, typical lease >$40 psf.

Also, it seems that there is a lot of new supply planned, which will affect future vacancies. While 1180 is a stunning building, it is naive for them to assume that as leases turn over, one of the newer buildings that are planned couldn't lure away tenants.

I think Atlanta is benefitting on its repuation as booming city, and I'm certain that there will be no economic slow-down in the near future, but I hope that none-of my retirement funds are tied up with these institutional investors who are obviously wearing deeply tinted rose-colored glasses.

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Since my pension is my husband I guess I didn't really think about it that way Atlrvr.

Then again, there could be a BIGGER picture that some of the average people are not seeing. I wonder what this big picture is...makes you wonder sometimes because surely I would hope a reputable fund manager would not make a foolhearty decision. If the General Electric pension fund is run like GE itself...extremely well but out for value...I can't see them going into investments blindly. That's why I wonder what do they know that we may not see.

Atlanta has had high vacancy rates for a few years now yet there are probably more office space being added than many cities with half the vacancy rate. These development companies are selling Atlanta properties and turning right around and building more buildings...in Atlanta. Now that I type this, it does seem like some may be putting all their eggs in one basket. Both Cousins and Hines have even more office space planned along the Peachtree St/Rd corridor.

It does make you wonder...but at any rate, I will bask in the great news of these recent highend sales.

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No doubt....success begets success, and if Hines can make ~$50M, then there is strong motivation for them to try and repeat success. I do view it as a good sign of the interest in the Atlanta office market, though Equity's withdrawal from the market, may indicate that they realize now is a good time to be a seller.

All in all, besides people's investments in pensions, this has little affect on the average Atlanta resident, and will likely long-term benefit the city with an abundance of office space, which means it can accomodate an abundance of new jobs.

As far as fund managers seeing something I'm missing. It's very likely the case, and I sincerely hope they do (as it is their job). The pessimist in me says, that they have lots of captial that needs to be invested, and for their real estate portfolio, it seems more attractive to be holding properties in Atlanta than in Charlotte, Nashville, San Antonio etc, and far more attractive than to be holding properties in Detroit or Cleveland.

As an after-thought, another cause for concern is to look who is buying and who is selling. As a casual observer, I would be concerned if developer/investors are selling and investment funds are buying. This tells me that the developer/investors see that there is much more money to be made in developing and then pulling out the equity rather than developing and holding long term.

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I would imagine the high dollar sales have been for buildings with full rent rolls and marquee tenants. That's how Cousins was able to pick up something like 191 Peachtree -- a fabulous building that's roughly twice the size of 1180 -- for about 1/3 of the cost.

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