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EXCLUSIVE: HUD Vacating Atlanta Tower, Leaving Landlord Looking To Sell

Atlanta Office

A maker of high-end jeans and clothing is looking to unload a Downtown Atlanta office building it owns as it prepares to lose its only tenant, the Department of Housing and Urban Development.

Five Points Plaza, which the Department of Housing and Urban Development has occupied since 1999, is about to be vacant.

Jordache Enterprises has listed the 17-story Five Points Plaza for sale with a $12M asking price, Bisnow has learned. The building at 40 Marietta St. is being marketed by an Avison Young team led by principal Chris Godfrey.

HUD's 25-year lease for the 123K SF of rentable space in the building expires in February, according to an inventory of leased office space maintained by the General Services Administration, which manages the federal government's real estate.

Jordache, the owner of fashion brands such as Jordache, XOXO, U.S. Polo Assn. and Jetlag, purchased the 143K SF tower for $6M in 2011 through affiliate Nakash Five Points LLC from LNR Partners, according to the Reonomy database. LNR bought the building in a foreclosure auction for $7M in 2009.

“They are not in distress, but it is something that they are interested in selling,” Godfrey told Bisnow Wednesday morning.

The move is part of the federal government’s efforts to consolidate its agencies into federally owned properties and reduce its office footprint in the age of hybrid work

A GSA spokesperson told Bisnow HUD will be relocating from Five Points Plaza to the Martin Luther King Jr. Building at 77 Forsyth St., a move to owned space the government estimates will save taxpayers $31M over the next 10 years.

Five Points Plaza has long been viewed as a potential candidate to vacate. In 2011, then-GSA Regional Administrator Shyam Reddy floated the idea of moving HUD out of Five Points Center and into the Peachtree Summit Federal Building just north of the Georgia Aquarium in Downtown, The Atlanta Journal-Constitution reported at the time.

Officials with HUD and Jordache didn't respond to messages seeking comment as of press time.

The apparel-maker also has a substantial commercial real estate portfolio, including Hotel Ocean — Miami Beach, The Villa Miami Beach, Showcase Mall in Las Vegas and the hotel Orchid Okeanos Israel.

But it is putting a for-sale sign on an office building despite the fact that investors and lenders have drastically reduced appetites for this type of real estate. 

Interest rates, pushed up 11 times since March 2022, have created a precipitous decline in investment sales activity in Metro Atlanta, especially of office properties, which saw a 78% year-over-year drop in volume in the third quarter and a 34% drop in average price per SF, according to Colliers Atlanta

The confluence of high interest rates and lower workplace usage have battered office valuations, causing a handful of properties in Metro Atlanta to fall into distress. But Avison Young principal Kirk Rich, who is also on the team marketing Five Points Plaza, said that isn't the case with Jordache, which has no debt on the building. 

But with HUD about to vacate, Jordache, headed by founder and CEO Joseph Nakash, saw an opportunity to sell the tower to an opportunistic investor, one most likely with plans to convert it into residential or a hotel, Rich said. Older office buildings with smaller floor plates and more ventilation are better suited for such transformations than modern office buildings.

The average floor at Five Points Plaza, built in the 1960s, is less than 7K SF, according to a listing on LoopNet, a far cry from the modern office floor plate that averages 25K SF to 28K SF.

“There’s no debt on the building. In fact, [Jordache] could sit on it themselves,” Rich said. “I think their real desire is to sell it right now.”

UPDATE, NOV. 29, 5:35 P.M. ET: This story has been updated with comments from a GSA spokesperson about HUD's relocation plans.