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When to Buy High in Suburbs

Washington DC

$33M may be a big price tag to pay for a suburban Phoenix office, but Buchanan Street Partners says snapping up Stapley was all about replacement cost. (It's cheaper to buy used than new with buildings, cars, and futons.)

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Buchanan Street's Brian Payne says it bought the two-building, 180k SF Class-A property from DESCO Group at a 20% discount than what it would have cost to develop similarly. (Plus you would've had to find somewhere to park a backhoe.) It's also got the benefit of stabilized cash flow at 90% occupied with tenants such as Wells Fargo and Cigna Healthcare. Cushman & Wakefield's Chris Toci and Chad Little brokered the sale. 

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Buchanan Street isn't the only buyer paying steeper prices in Phoenix. According to a recent C&W report, 2700 Corporate Center in Chandler (above) traded to WP Carey & Co for a whopping $236/SF, and even The Corporate at Pima Center in Scottsdale sold to CarVal Investors for a cool $50M, or $184/SF. The reports says price per SF is up 3% so far this year.

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Brian says Phoenix is one of the handful of markets Buchanan Street is focused on for its investments: Others include Denver, California, and Houston. The firm is shopping for both value-add and core-plus office and industrial properties, especially in the Southeast Valley (where it purchased Cotton Center IV recently, above) and Scottsdale.