The State House Square complex in Hartford has been purchased for $66 million. The office-building sale is the largest for the city in the past 15 years, both in terms of total square footage and price.
State House Square was sold last week, marking the single-largest office transaction that Hartford has seen in more than a decade.
CB Richard Ellis-New England successfully negotiated the sale of the 844,813-square-foot complex, which is located in the city’s downtown section. The Class A office property was sold by Aetna Life Insurance Co. to an affiliate of Norfolk, Va.-based Harbor Group International for approximately $66 million.
John McCormick and Pat Mulready from the Hartford office of CB Richard Ellis and Jeff Dunne, who heads that company’s New York Tri-State Investment Team, were the exclusive investment advisors for Aetna in the sale and also procured the buyer.
The deal is the largest office-building sale, in terms of both total square footage and price, completed within the Hartford central business district in the last 15 years.
State House Square is located across the street from the Old State House. Constructed in 1987, the building features a 25,000-square-foot food court; Morton’s Steak House; a fully equipped, 48,000-square-foot, state-of-the-art health club; a 450-car underground parking garage; and a variety of retail shops and amenities ranging from dry cleaning to shoeshine service.
McCormick, executive vice president at CB Richard Ellis, noted that there was significant interest in the property, from both regional investors and national investors outside of the market.
“State House Square attracted over 12 bids from national investors during the marketing process. The high-quality construction, strong tenant roster and the property’s strategic location within the capital city of Connecticut was paramount to the buyer’s interest,” he said.
McCormick added, “Another determining factor was the current market stability and increased capital investment in such projects as Adriaen’s Landing, three downtown residential developments and the pending charter reform within the city of Hartford. The successful sale of State House Square to Harbor Group International illustrates that high-quality real estate with strong tenancies is highly sought after as an investment vehicle, and perhaps more importantly, that Hartford is becoming more and more attractive to investors from outside the market.”
‘Prominent’ Address
Harbor Group International is an investment group with over $800 million in assets in 15 states. The company currently owns 11 million square feet of office, retail and multifamily properties in three countries. Formed in 1998, Harbor Group International is the result of the 1998 merger of Harbor Group Capital Corp. and
BO-DA Investment and Trading, which is based in Tel Aviv, Israel. Together the two firms have more than three decades of combined experience in acquiring office buildings, apartment complexes, shopping centers and other commercial properties in North America and Europe.
“The acquisition of State House Square is a key component of our strategy. Like other Class A central business district office properties we have purchased, it is a prominent landmark anchored by a strong tenant base on long-term leases,” said Jordan E. Slone, Harbor Group international chairman and chief executive officer. HGI has previously acquired other prominent CBD office properties such as Wachovia Tower in Baltimore, SunTrust Center and First Virginia Tower in Norfolk, National City Center in Indianapolis and PNC Center in Cincinnati.
“Certainly the building itself is a trophy, and is definitely considered in the top tier of all downtown buildings,” said McCormick. “It is the largest office project to be sold in quite some time. It’s 850,000 square feet, and it sold for $66 million, so it’s easily the largest office deal in 15 years.”
McCormick believes that the group was attracted to Connecticut’s capital city because as it ranks against other comparable cities, “there is not another market that has the operations and headquarters that Hartford does.”
He added, “While we’re currently at an availability rate of 19 percent, including direct leasing and sublease space, that rate has been steady over the last 15 months. So from an outside national perspective, people feel this is a market poised to rebound.”
The sale is also an example of the increased interest in Hartford that has cropped up lately. McCormick said over the last eight weeks, showing activity has been on a pace that is 2 to 1 over what took place a year ago. Because of such indicators, CB Richard Ellis has forecast a five-year positive absorption rate.
“At this point it seems to be an overly used phrase, but we’re cautiously optimistic about the future of the market,” said McCormick.
The State House Square building includes two towers comprising 650,000 square feet. The towers are connected to a retail center of 70,000 square feet that sits on top of the health club and parking garage. There is also a Class B office portion of the building called 50-58 State House Square that is 80,000 square feet.
McCormick said the Six Pillars of Strength, a strategic redevelopment plan for downtown Hartford, is one of the reasons why activity in downtown is picking up.
“When you see $2 billion being spent within the city of Hartford through a public/private partnership, the CBD starts to look really attractive,” said McCormick. Based upon the Greenberg Report released in 1998, the six pillars are a rejuvenated civic center, a highly developed waterfront, a downtown higher education center, a convention center and sports megaplex, the demolition or redevelopment of vacant buildings and the creation of downtown housing units and an increase in the number of well located and inexpensive parking spaces.
The Capital City Economic Development Authority, a quasi-public authority set up by the state to drive government-sponsored developments in Hartford, oversees most of the six pillars plan.
“A lot of the specific efforts of the CEDA are geared toward properties, locations and sites within an immediate three-block radius of State House Square. That may not doing anything for occupancy, but it will guarantee that is a strong and prominent business address for the next 20 years,” said McCormick.
This is the fourth major CBD office sale in Hartford completed by McCormick and Mulready since 1999. The other assets included 100 Pearl St., One Financial Plaza and 280 Trumbull St.
