I just got wind this morning that the 111,000 office building at 1301 Riverfront Parkway has traded and if the rumor is true it sold for $200,000 above it’s $17,800,000 asking price.
For those not familiar with the property 1301 is a large, multistory, multi-tenant office property whose anchor tenant, The State of Tennessee, had 11 years remaining on ~58% of the building. Aesthetically it is fairly typical office park type property, however, the seller kept it in excellent condition. It’s proximity to downtown and to the future redeveloping Alston / West End site make it very attractive.
Trading at $18m would put it at only $162 per square foot, seemingly a very fair price for a high quality property. With a claimed Cap Rate of 8.5% at asking it also represented an excellent income opportunity.
The trick for Chattanooga, of course, was that this property was an outlier. An anomaly. Where else in the city is there a similar property? This made it harder for buyers to make any sort of comparison to validate the value proposition. If you are considering buying one of many it’s much easier to get comfortable because you can point to all the others and say “see those have a similar value”. When you have one there can be a bit of a feeling of vertigo when trying to confirm valuation.
With only a vague rumor to go on we have no way to determine the buyer and their motivation. My suspicion is that this will turn out to be an out of town and likely out of state buyer. The commercial market nationally is being squeezed hard for any yield. So just posting this property on a national level would bring interested buyers to the city. Again this is good news for Chattanooga. People who may never have looked at the city before are now aware of its potential and will want to find a way into the market. Bad news is we had only one.
I will update as details are made public.
Looks like it was actually sold at asking. While not as impressive as if it was sold above asking the buyers enthusiasm for the city is the real news. This kind of enthusiasm will move Chattanooga a long ways.