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Southfield Town Center to sell next month

The Southfield Town Center is expected to be sold by the end of next month in what would be among the most significant office transactions in the last decade, Crain’s has learned.

An estoppel certificate sent to tenants in the region’s second-largest office complex says that a sale to a Delaware entity called 270B STC LLC is expected to be finalized by the end of next month. The true identity of the incoming ownership is not yet known, nor is the purchase price.

In commercial real estate, an estoppel certificate is sent to tenants of a building that is being purchased using commercial debt (as opposed to cash) to confirm things like major lease terms such as duration and rate. They are typically sent to tenants in the late stages of the purchase process.

Messages left with two executives from the current ownership, New York City-based 601W Cos., the last several weeks have not been returned. Another message was left Wednesday afternoon with Michael Silberberg, principal of the company. A message was also left Wednesday with the property management company, Transwestern.

601W paid $177.5 million for the 2.2 million-square-foot property in 2014, taking out $142 million in commercial mortgage-backed securities debt that matures in May 2024, according to data from New York City-based Trepp LLC. At the time it purchased the property, the company expected its ownership to last no more than five years.

In 2018, Crain’s reported that the ownership had put about $56 million into renovating the property, which consists of five office towers.

Trepp data shows that net operating income last year was about $17.1 million, down from about $18.1 million in 2020 and about $14.9 million in 2019. Revenue last year was about $37.2 million, up from $36.4 million in 2020 and $33.4 million in 2019. Operating expenses rose to $20.1 million last year, up from $18.3 million in 2020 and $18.5 million in 2019.

A March 2014 appraisal just before 601W bought the complex valued it at $181 million.

Prior to 601W, New York City-based Blackstone Group LP owned the complex, which it purchased in 1999 for $270 million. Blackstone had fallen behind on a $235 million CMBS loan on the property originated in 2004 by Greenwich Capital Financial Products Inc.

Southfield’s office market is the second-largest in the region, behind only downtown Detroit. Southfield has 13.8 million square feet of office space and a vacancy rate of 33.3 percent, the second highest rate in metro Detroit, behind the downriver area, according to a first-quarter office market report from the brokerage firm JLL.

The average asking rent is $18.69 per square foot per year.  The complex has had its ups and downs during the pandemic.

Plante Moran consolidated two Southfield offices into the complex, creating a 12-floor office totaling 192,600 square feet in the 3000 Town Center building, one of the largest office leases the last two years. However, the 4000 Town Center tower was at risk of losing its largest tenant, NTT Communications Corp., the Tokyo-based parent company of the cloud services provider formerly known as Secure-24, which put its roughly 100,000-square-foot headquarters up for sublease.

Posted By: Crain’s Detroit Business on April 13, 2022.  For more information, please click here to read the source article.

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