Monday, August 13, 2012

Owner of Station Square considers selling complex - Pittsburgh Post Gazette

Station Square could be headed for the selling block.

Owner Forest City Enterprises has hired the CBRE Inc. real estate firm to "look at options" for the South Side entertainment, dining, office and retail complex, including a possible sale.

The Cleveland-based developer also has enlisted the Plasencia Group, a specialist in the hospitality business, to explore a potential sale and other options for the Sheraton Station Square hotel as well.

Besides a possible sale, CBRE also will investigate whether there's interest from other investors in joining Forest City in ownership of the 52-acre Station Square complex on the banks of the Monongahela River.

"We're looking at all of our options at this point," Forest City spokesman Jeff Linton said Monday. He stressed that no decisions have been made and that the developer could end up retaining the property.

"This is exploratory," he said.

Forest City purchased Station Square, a former Pittsburgh and Lake Erie railroad terminal, from Pittsburgh History & Landmarks Foundation in 1994. Four years later, it acquired the Sheraton and completed a $25 million, 104-room expansion to the hotel in 2002.

The same year, the developer finished the $25 million Bessemer Court project that brought Hard Rock Cafe, Bar Louie, Joe's Crab Shack and a 100-foot-wide dancing fountain synchronized to lights and music to the complex's central court.

Nonetheless, after 18 years of ownership, Forest City believes it is an opportune time to test the waters for a possible sale or potential new investors, Mr. Linton said.

"The Pittsburgh market is a strong market," he said. "The potential is there to get a reasonable return on investment or an acceptable price on a quality real estate asset."

Given the market's strength, "it's only prudent for us as a real estate company to look at these kinds of options. It's a good time to look at potential transactions," he added.

The hiring of CBRE to explore options comes at a time the Pittsburgh Riverhounds are building a $10.2 million, 3,500-seat soccer stadium on the west side of Station Square. It should be ready this fall.

Last spring, biomedical firm Invivodata Inc. signed a lease to occupy 28,000 square feet of Station Square's 378,000-square-foot Commerce Court building, which boasted a 89 percent occupancy rate as of the second quarter, according to real estate firm Newmark Grubb Knight Frank. The Landmarks Building has a 92.7 occupancy rate.

At the same time, Forest City has been concentrating its development activity more and more in larger cities such as New York, Boston, Washington, Denver, Dallas, Los Angeles and San Francisco.

"Those are our primary growth markets," Mr. Linton said.

While the developer is "happy with the assets" it has in cities such as Pittsburgh and Cleveland, it is "somewhat less inclined to invest significant new dollars" in those places, he said.

In 2006, Forest City bid to secure the state license to put a gambling casino at Station Square but lost out to late Detroit businessman Don Barden and the North Shore. Mr. Linton said that loss, which Forest City took hard, had no bearing on the decision to explore a possible sale of Station Square.

And although Forest City could decide to retain the property, Mr. Linton said that if the developer is able to get an "appropriate return" for the real estate, "I assume our preference would be to sell."

Gerry McLaughlin, executive managing director of Newmark Grubb Knight Frank, said the decision to explore a possible sale makes sense at this time.

"They've done a good job leasing up their buildings. Both [Commerce Court and the Landmarks Building] are pretty well leased right now and the market in Pittsburgh is pretty strong. It's not a bad time to go out and check out the market," he said. "They're doing what any prudent owner would do at this point."

Mr. McLaughlin said he does not believe Forest City is trying to unload the property. He noted that it had just secured Invivodata as a tenant at Station Square and that Wesco International Inc., a provider of electrical, industrial and communications products, renewed its lease about a year and a half ago.

"All of those are positives. It's not a matter of them looking to dump it. It's a matter of them trying to get the best value, and now is the time to do it if they're going to do it," he said.

Mr. McLaughlin added that hotels are "hot commodities" right now, particularly those with high occupancy rates, so it is not surprising that Forest City would consider selling the Sheraton.

Mr. Linton said none of Forest City's other properties in the region, including Liberty Center Downtown and The Mall at Robinson, is affected by the decision to explore options for Station Square and the Sheraton.

Mark Belko: mbelko@post-gazette.com or 412-263-1262.

First published on August 14, 2012 at 12:00 am

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