For decades, financial institutions controlled major portions of Providence’s real estate market, with high-rise office buildings owned by companies such as Fleet Bank and Old Stone Bank.
But with Bank of America’s $62 million sale of 50 Kennedy Plaza and the smaller Phenix Bank Building this month to O’Connor Capital Partners, financial institutions have now largely exited the downtown scene, leaving in their place out-of-state institutional investors.
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That’s not necessarily a bad thing. According to Charles Francis, president of CB Richard Ellis/New England’s Rhode Island office, the change in ownership means there is interest in the “strong” Providence market.
“It means that investors have come in from the outside and are very interested in investing in this,” Francis said. “It’s a far cry from 10 years ago or 20 years ago.”
Bank of America spokesman Ernesto Anguilla confirmed last week that on Nov. 15, the North Carolina-based bank had sold 50 Kennedy Plaza for $58 million and the Phenix Bank Building for $4 million, but he declined to comment further.
Francis said the prices were moderate: Together, 50 Kennedy Plaza and the adjacent Phenix building total about 386,000 square feet, so the cost to O’Connor Capital was about $160 per square foot.
With rents between $24 and $30 per square foot on an annual basis, the company will be able to justify the purchase, Francis said. The larger building – which currently houses Nortek, Citizens Bank and Providence Equity Partners, among others – is about 20 percent vacant.
The firm will be putting additional tenants in there, Francis said.
The transaction marked New York-based O’Connor Capital’s second foray into the Providence market. The real-estate investment firm is one of the partners in the One Ten Luxury Residences, the condominium project that is slated to be the city’s tallest building once completed. (At 235 feet, 50 Kennedy Plaza is currently the city’s fifth-tallest.)
The out-of-state interest in downtown Providence became evident more than two years ago. Other major transactions have included the sales of One Financial Plaza 2005 for $46 million in January to Commonwealth Ventures and GE Asset Management, General Electric’s pension fund based in Connecticut; the sale of One Citizens Plaza for $60.2 million in October 2005 to American Financial Reality Trust; the sale of The 903, a 330-unit condominium building west of Providence Place, for $65 million in October 2005 to New York-based The Athena Group and Providence’s Paolino Properties; and the sale of Providence Place mall for $510 million in April 2004 to Maryland-based The Rouse Co., which was later bought out by Chicago’s General Growth Properties.
The latter property actually jump-started the interest in the city by outside investors, said Francis. The opening of Providence Place showed a confidence in the Ocean State’s resurgent capital city that attracted the large institutions, he said.
“Doing such a phenomenal project in a city that was just coming of age set the stage for people to believe in Providence – and to believe that, if they invested money here, they could realize a good return,” Francis said. “That’s exactly what we’ve seen all the way through all of these transactions.”
Since then, interest has been kept up by the city’s improved infrastructure, a changed political climate and the scarcity of available investment property in other major markets.
The departure of the financial institutions doesn’t signify the banks are deserting the city, Francis said. Rather, it shows that they no longer feel that it is necessary to control the real estate market in Rhode Island.
“[The sale] verifies that the market is strong,” Francis said. “It goes to the issue of who’s interested in Providence.
