The Property
Developed in 1986, Gateway One is a 15-story, Class A office tower located on the Gateway Mall in the heart of downtown St. Louis. This popular, trophy-level Building enjoys superb views and has numerous amenities. At the beginning of 2005, near the end of the owner’s hold period, the Building was a healthy 91% leased. However, an additional 21% of the Building would be rolling over in a soft market.
Acquisition/Assignment
Members of EVS Realty Advisors’ staff developed the Building and have managed and leased it since its inception. A situation developed in 2005 that was a value-add opportunity to renew leases that were rolling over, lease up the vacant space, and then market the Building for sale. In addition to renewing 86,000 sq. ft. of leases that were expiring in 2005, there was a large tenant in the marketplace looking for 60,000 sq. ft. The challenge was that Gateway One only had 30,000 sq. ft. of contiguous vacant space available.
Gateway One Photos
Action Plan
EVS Realty Advisors' strategy was a complicated restacking of the tenants in the Building in order to accommodate a large user, while renewing existing tenants. Due to strong tenant relationships, EVS Realty Advisors was able to make agreements with four of the existing tenants to relocate to different space in the Building. By accomplishing this, EVS Realty Advisors was able to put together a block of 60,000 square feet on floors 11-13 and negotiate a new long-term lease with Marsh McLennan. Part of the Marsh McLennan space would consume the existing building conference center, which was critical to renewing a 25,000 sq. ft. lease with Northwestern Mutual, the primary user of the conference center. Ownership agreed to take back 2,000 sq. ft. from Smith Barney, extend their lease, and utilize the 2,000 sq. ft. to build Gateway Summit, a new state-of-the-art conference center located on the top floor of the Building overlooking the new Busch Stadium. By doing so, ownership was able to sign a long-term lease with Northwestern Mutual. Finally, EVS Realty Advisors was able to accommodate Peabody Holding, the Building’s largest tenant, in its expansion needs and extend its lease in the process.
Summary
Building Size: 409,000 sq. ft.
Class: Class A
Year Built: 1986
Purchase Price: $50,000,000
Sales Price: $65,000,000
Hold Period: 6 Years, 7 Months
IRR: 15.6%
Results
- Building restacking allowed for the new larger tenant
- Within nine months, the percentage leased improved to 99%
- Signed long-term lease renewals
- In February 2006, Gateway One sold for $159 per sq. ft., one of the highest prices paid per sq. ft. for a Class A multi-tenant building in St. Louis’ CBD in the past 15 years
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