Last week the Phoenix Business Journal reported the office portion of Freeport-McMoRan Center in Downtown Phoenix sold for $110 million, or $442 per square foot. In an exclusive interview with Commercial Executive Magazine’s Mandy Purcell, CBRE’s Executive Vice President Jim Fijan who was responsible for negotiating the transaction, discusses the sale, what it means for the metropolitan Phoenix investment market and what to look for as we near the end of 2014 and head into 2015.
Mandy: First, congratulations! Can you give me the specifics on the deal?
Jim: The sale was for the 249,012 sq.-ft. class-A office portion of the Freeport-McMoRan Center. The office asset is leased to Freeport-McMoRan, Inc.’s corporate HQ. The Westin Phoenix Downtown hotel, also within the building, was not part of the transaction and is still owned by the seller.
Mandy: Okay, let’s talk numbers. $442 per square foot is a HUGE number! Where does that rank among other office investment sales in the market?
Jim: This is actually the highest price per square foot ever paid in the metro Phoenix office investment market – which is great. It really shows how Phoenix has rebounded and where we’re going.
Mandy: Why do you think that number was so high?
Jim: Freeport-McMoRan Center is one of the most prominent assets in all of Phoenix. The long term nature of the tenant’s lease as well as the investment grade credit of the tenant makes this a very attractive investment.
Mandy: Do you think this sale is a good example of the health of the market?
Jim: Phoenix has a tremendous amount of positive momentum right now. Transaction volume year-to-date for Class A and B assets in Phoenix is up 26% compared to 2013; and average price per square foot year-over-year for Class A and B assets in Phoenix is up 22%. Moreover, top of the market price per square foot year-over-year is up 80%.
Mandy: So, who’s buying in Phoenix? Who are the usual suspects?
Jim: REITs, foreign buyers, high net-worth private investors. Phoenix is back on the map as a place for all buyer types to place capital.
Mandy: Why? Does that mean we’re officially “recovered”?
Jim: Phoenix’s office market fundamentals continue to improve, particularly in core locations. Capital has been watching and waiting, and now they’re looking to jump back into metro Phoenix. The flip side to this is as institutional capital begins to make up a greater share of total capital chasing deals, owners of institutional-grade office product will look to capitalize on those opportunities and bring their properties to market. We’re already seeing this with assets like Esplanade III.
Mandy: What would your advice be to investors looking at Phoenix?
Jim: CALL ME.