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Posted on Wed, Aug 4, 2010 : 3:10 p.m.

Buyers disclose purchase price of 777 Building in Ann Arbor

By Paula Gardner

777 pix.jpg

The 777 Building - officially known as Eisenhower Plaza and now bearing the Thomson Reuters name - is located at the I-94/State Street entrance to the city.

Lon Horwedel |

What’s the 777 Building in Ann Arbor worth?

Hint: It's more than you'd think, given recent commercial real estate trends.

The answer is $65.2 million, based on what buyers of the landmark office tower paid in June.

That’s according to documents released today by the buyer: CommonWealth Real Estate Investment Trust, the new name of publicly held REIT, formerly known as HRPT.

The sales figure reflects a price of $159 per square foot for the 410,000-square-foot property, which includes the 10-story office tower at the corner of South State and Eisenhower and the building just east of it that’s leased to Proquest.

The sales price, unavailable until Commonwealth released its second quarter results today, is higher than the building’s estimated market value of $53.2 million, based on the $26.6 million city assessment.

According to information released on a conference call that started at 1 p.m., the cap rate - or rate of return based on purchase price and net operating income - for the 777 building’s purchase was 9.4 percent.

Further, based on those numbers, that means that the NOI of the property - at 88 percent leased to 16 tenants - is $6.128 million.

So how do those numbers fit into Ann Arbor real estate?

First off, it shows the difference between a leased building today and speculation at the bottom of the recession. The 174-acre ex-Pfizer site sold for $108 million, in a deal announced in late 2008 - so the leased 777 Building was acquired for about 60 percent of the cost of the empty 2 million-square-foot complex.

Further, the size of the building and the price are both larger than the city is used to seeing. The price per square foot is higher than most local deals since 2008 tightened the credit markets. In 2007, some properties were flirting with the $200 per square foot plateau, like the Black & Veatch Building on Green Road. Since then, empty buildings in some locations are selling for well under $50 per square foot.

This deal also shows the return of public real estate investment money to the region and what it can mean to building prices. One other example from better times: Arborland Mall sold at a 6 cap rate in 2005 - or about $250 per square foot.

Meanwhile, the lower the cap rate, the lower the risk - and the higher the price, according to real estate principles.

The 9.5 cap rate for the 777 building signals moderate risk for CommonWealth - but it’s also far less than many deals struck in Metro Detroit in recent years. We can look at that as a sign of Ann Arbor's relative stability for investors.

Commonwealth, then operating at HRPT, bought the building in June from an entity of Chicago-based Transwestern Great Lakes LP.

The Ann Arbor building purchase was one of eight in the second quarter by CommonWealth, based in Newton, Mass. [NYSE: CWH]. It also entered agreements to buy 11 more, while making plans to sell 15.

Overall, the company owns 521 properties totaling 67.5 million square feet.

The REIT has a market capitalization of $1.74 billion as of today, when its stock was selling at $26.92 per share.

Paula Gardner is Business News Director of Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.


Rhe Buttle

Thu, Aug 5, 2010 : 12:44 p.m.

Price is high due to current tenants -- Thomson Reuters and ProQuest. Also the fact it is immediately opposite Wolverine Tower, rumor has it UoM wants the 777 building, and will build a pedestrian connection across the street between the two, a la Minneapolis.

Paula Gardner

Thu, Aug 5, 2010 : 12:18 p.m.

An appraiser wouldn't compare the properties, but for the purposes of this story, I wasn't really looking for official "comps." What I wanted to mention was other $50M plus deals in the market and show some similarities/differences. In my opinion, this deal shows the relative bargain of the Pfizer buy - and probably how Arborland couldn't sell again for its top of market price a few years ago. Either way, I also thought that anyone reading these numbers might reasonably ask - what else has sold for near that in the area? And the answer is the Pfizer property.


Thu, Aug 5, 2010 : 10:02 a.m.

So its not really a good/accurate comparison because it dosent take into account all these things? At least just looking at it thats what I tend to think...


Thu, Aug 5, 2010 : 2:22 a.m.

Who cares Ann Arbor is an overpriced fools paradise it is filled with junkies and educators that think highly of themselves. The collage is filled with students from other country's that cannot get into the good schools in there country. The UM will take any one Its the best school money can buy.


Wed, Aug 4, 2010 : 10:08 p.m.

The only comparison that might work is Pfizer sold for less than $50 a square foot - and 777 for more than $150. This comparison does not take into account location, land, or the amount of the building occupied. Anyway it should be good news, it will mean more tax money for the schools and the city.


Wed, Aug 4, 2010 : 7:18 p.m.

Isn't comparing this property to pfizer the same as apples to oranges? Its less then a 1/4 of the size (square footage, and probably a fifth of the acreage), so I would expect them to pay less. Please explain to me what the comparison shows, I am not in real estate.