Tuesday, March 24, 2009

Re: Building, State Office

A quick back of the envelope calculation here:

Projected rent in the (now former) State Office Building: $15/square foot per year.
Size of the building: 273,000 square feet
Total Gross Rent for one year: $4,095,000.00

Purchase price: $4,600,000.

Even with repairs, asbestos clean up, creating new office spaces, utilities, taxes and so on and so forth, a two-to-three year projected payback is pretty damned sweet.

Now, I could go on about how silly it's now going to be to divide State services up between different buildings and how much it's now going to cost the State taxpayers in rents, but I feel those arguments will probably fall on deaf ears.

But well done Millcraft. Way to stick it to the man.


Anonymous said...

The value of the building should be net rents divided by a capitalization rate. Assuming the net rents are a modest $2MM and the cap rate was 10%, that would make the building worth at least $20MM.

The Clark Building is listed foe $30MM, FWIW.

Bram Reichbaum said...

Well gosh darn. The article states that the Commonwealth put it out for bid twice, and Millcraft's bid was the only (and therefore highest) bid tendered.

So did the state somehow game the system? Or are your calculations totally off base?

Are there other factors which may impinge on the math, such as only so many people are willing to take a risk in Downtown Pittsburgh?

MH said...

If it's the building I'm thinking of, they'll never get the "DMV" smell out of the ground floor.

O said...

Anonymous sounds closer to reality, Bram.

Mark Rauterkus said...

Where is the CBA for the sale of the building?

CBA = Citizens Benefit Agreement.