December 28, 2018
The latest new construction office sale in Charlotte closed last week in a deal worth more than $200 million.
POP Capitol Towers LP, affiliated with Atlanta-based Preferred Office Properties, acquired Capitol Towers in SouthPark for nearly $208.8 million, according to Mecklenburg County real estate records. Preferred Office Properties, a wholly owned indirect subsidiary of Preferred Apartment Communities Inc. (NYSE: APTS), acquired the mixed-use property from Lincoln Harris, the developer. Capitol Towers includes two 10-story buildings containing 472,500 square feet of office in addition to retail space, a medical office building and parking deck.
Capitol Towers’ south building delivered first, in 2015, and the north tower opened last year. Major office tenants at Capitol Towers include Albemarle Corp. (the largest occupier), Dixon Hughes Goodman, Sterling Capital Management, JPMorgan Chase Bank, MassMutual Life Insurance and Citizens Bank.
The retail and medical space are fully leased to SouthPark Grill, Legion Brewing Co. and Novant Medical Group. Capitol Towers was
88.5% leased at the time of the sale.
An 18-year, fixed-rate acquisition loan with New York Life Insurance Co. was also part of the deal.
Elsewhere in North Carolina, Preferred Office Properties acquired the Wells Fargo Capitol Center tower in downtown Raleigh for $173
million earlier this year. Preferred Office, formed in 2016, has office holdings throughout the Southeast, including in Texas, Florida,
Georgia, Tennessee and Alabama.
The Capitol Towers acquisition is one of the largest sales in Charlotte commercial real estate this year on a total sale basis. The mixed-use complex sits on a 5.8-acre site bounded by Carnegie Boulevard, Congress Street and Charmeck Palisades Drive. Lincoln Harris earlier this year filed a rezoning petition with the city to allow what’s described in site plans as Capitol Towers 3, at 5954 Carnegie Blvd., a vacant site immediately adjacent to the original two office buildings. The site plan indicates Lincoln Harris is seeking entitlements to build up to 340,000 square feet of office and 16,000 square feet of retail there, in a building up to 180 feet in height.
Johno Harris, president of Lincoln Harris, in a recent interview declined to comment on specifics relating to construction timeline of that third office building.
“I think there is still demand here in SouthPark,” he said, adding there were no big blocks of contiguous space in SouthPark when Lincoln Harris started Capitol Towers and that the firm did the project on a speculative basis and leased it up. “I’m not saying that we’re going to go build this one spec. Once we get through zoning, we’ll see where the market is and see how that all plays out.”
The rezoning petition for Capitol Towers 3 had its public hearing at December’s City Council zoning meeting and is heading for a vote at a future meeting, potentially as soon as next month.
Ryan Clutter, senior managing director at HFF Carolinas, which marketed the property, said in a statement that Capitol Towers was a sought-after investment opportunity and drew “significant interest” from numerous institutional investors as well as foreign capital sources.
“The high quality of the real estate coupled with the exceptional credit and lease term in the rent roll were very appealing to investors,” Clutter said.
Clutter, Chris Lingerfelt, Zack Drozda and Scot Humphrey at HFF Carolinas represented the seller in the transaction. Lincoln Harris has been retained for leasing and property management, with Campbell Walker and Sara Hogan continuing to lease Capitol Towers. Ed Coco and Travis Anderson at HFF arranged the financing.