Monday, October 1, 2007
Albuquerque Plaza Has 22 Stories, a Pyramid, Fast Elevators and Local Ownership
By Richard Metcalf
Copyright © 2007 Albuquerque Journal; Journal Staff Reporter
The pyramid-shaped roof of Albuquerque's tallest building is one of the signature images of the city.
"Albuquerque Plaza has become the icon of the Downtown skyline," said Jim Long, managing partner of the local investment group that owns it. "It represents Albuquerque's progress and Albuquerque's future."
The 22-story office tower appears regularly on the covers of publications promoting the city, often paired with its shorter twin, the 20-story Hyatt Regency.
"Those two towers emphasize our urban core," said Lynne Andersen of the National Association of Industrial and Office Properties, which featured the two high-rises on the cover of its local commercial real estate directory in 2006.
But even a first-class office icon must weather changes in the economy and consumer tastes.
The 390,533-square-foot tower has never been full since it opened in 1990, Long said. Reflecting a soft demand for office space in Downtown, Albuquerque Plaza's occupancy rate has been as low as 83 percent in recent years.
But now the building is 92 percent occupied, with new tenants such as El Paso-based Hunt Development Group and California-based SunCal Companies, Long said.
"We expect to be at 100 percent occupancy in the next 12 months," he said.
As one of Albuquerque's premier office properties, Albuquerque Plaza would seem to belong in the commercial real estate portfolio of a large institutional investor.
In fact, it had been. Crescent Real Estate Equities, a real estate investment trust or REIT headquartered in Fort Worth, owned the building from 1995 to early 2005.
Faced with the eventual departure of one of its larger tenants the Bureau of Indian Affairs Crescent put the building on the market in order to concentrate on larger cities such as Atlanta and Seattle.
The BIA, which moved to near 12th Street and Interstate 40, was part of an exodus of government agencies from Downtown between 2004 and 2006.
"If that vacancy hadn't been forthcoming, it's unlikely we would've been able to buy the building," Long said.
Another investor backed out of purchasing the property, largely because of the BIA's pending departure and the 43,000 square feet of vacated space that would result.
"We were there, ready to go with check in hand," Long said.
Add up all of the space in the building office, retail and parking structure and the local investors paid $99 a square foot, Long said.
"It's a pretty extraordinary purchase for us," he said. "We feel today it would cost over $100 million to replace this building."
The local investment group, called Albuquerque Plaza Investment LLC, includes a who's who of local business people and entrepreneurs.
Long is well-known in the hospitality industry. He was co-founder of American Property Management Corp., now headquartered in San Diego, and is the CEO of Heritage Hotels & Resorts Inc. in Albuquerque.
Less known about Long is that he has been investing in commercial real estate since the 1980s. Since 1997, many of his investments have been done in partnership with Chris Smith, a former Albuquerque resident who now lives in North Carolina.
In addition to Long and Smith, other investors in Albuquerque Plaza are:
Randy Briggs, who was founder of SunSoft, a contact lens maker that has since been sold. He is now involved in real estate.
Michael and Sheril Budagher. Michael Budagher is best known as head of Specialty Teleconstructors, a Cedar Crest-based maker and operator of wireless transmission towers in the 1990s. The company has since been swallowed up in corporate mergers.
Mark and Ingrid Gorham. A former orthodontist, Mark Gorham is from a well-known oil-and-gas family in Albuquerque.
Sandi Pressley and Darryl Adamson. Pressley is a perennial top-selling residential realty agent, while Adamson is a business executive.
Joe and Esther Vigil. The Vigils were early investors with Long in the acquisition of several hundred apartment units in the 1980s.
"It's a small group," Long said. "But these are people who take a lot of pride in Albuquerque."
A little history
Albuquerque Plaza and the 295-room Hyatt Regency building were built as one project by Beta West, which at the time was the commercial real estate arm of Denver-based US West (now Qwest).
The magnitude of the project is underscored by the fact that there haven't been any high-rises built in Albuquerque since the two towers opened in 1990.
"There's a big disconnect right now between the cost to build a building like this and what the Albuquerque rental market would pay to occupy space in it," he said.
Beta West sold both towers to Crescent as part of a broader sell-off of its commercial real estate portfolio. The Hyatt Regency building is now owned by a Chicago investor.
Upon taking over ownership of the office tower in February 2005, Long said, the emphasis was on leasing the empty and soon-to-be-empty spaces. At this stage, the BIA's 43,000 square feet of vacated space plus another 25,000 square feet have been filled, he said.
The asking lease rate for office space has gone up from $17 a square foot in early 2005 to $24 today, Long said.
Albuquerque Plaza's lease rate puts it in competition with new office buildings in the Journal Center area near Paseo del Norte and Interstate 25.
Many national companies interested in expanding to Albuquerque begin their search for office space in Downtown, Long said.
"I would say they look at the urban core first because they are used to having operations in an urban environment," he said.
"What we're seeing is the emergence of a younger, educated work force that is becoming accustomed to living, working and playing in a Downtown environment," he said.
The owners now plan more than $1 million in upgrades to the public areas of the office tower.
Since Albuquerque Plaza is already one of the ritziest office properties in the metro if not the ritziest Long acknowledges that the owners are raising the bar for top-tier offices in the metro.
"I think we're going to show Albuquerque what a real fabulous luxury office building looks and feels like," Long said. "That's the next step for us."
Constant maintenance is one reason that allows for investing in the remodel of public places like the lobby, retail corridors, elevator landings and public restrooms. "This building has been kept in first-class condition since it was built," he said.
The building has its own dedicated five-member management team, which is extremely rare for a single office property in the metro.
The team includes property manager Kristi Dutcher, leasing director Brenda W. Moore, operations director Kenneth Badsgard, building engineer Mike Lopez and administrative assistant Kari Zika.
"With attention to detail, a building like this can last forever," Long said.