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Mass. trust buys One Shell Square

October 4, 2011

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NEW ORLEANS—Louisiana's tallest and largest skyscraper, One Shell Square, has been sold for $102 million to a Massachusetts real estate investment trust.

The Times-Picayune reports ( the 51-story building's longtime owner, Metropolitan Life Insurance Co., sold the limestone building to the CommonWealth REIT of Newton, Mass., around the sixth anniversary of Hurricane Katrina in late August.

The sale brings a new real estate company to New Orleans that is likely to expand.

Timothy Bonang, vice president of investor relations at CommonWealth, said his company tries to get into the market by purchasing a "trophy asset," and then hopes to pick up other properties in the market. One Shell Square is CommonWealth's only holding in Louisiana.

"We try to purchase what we think is one of the best assets in the market, and then we hope to add through additional acquisitions over time," Bonang said. "What we really look for are high-quality assets, high credit-quality tenants, and long-term leases."

CommonWealth, which is traded on the New York Stock Exchange, specializes in office and industrial properties. The company has been selling suburban properties in recent years, shifting more heavily into newer, Class A central business district office properties.

Bonang said his company has entered the New Orleans market for the long haul. "We have a buy-and-hold strategy, so we don't look to redevelop or lease up a property and then flip it," he said.

A CommonWealth-affiliated company, REIT Management and Research Real Estate Services, will manage the building. Bonang said the company generally hires the people who have worked at the building.

Evan Stone, managing director of the capital markets group at Jones Lang LaSalle, the firm that sold the property on behalf of MetLife, said interest in the tower was strong.

"We had a lot of interest, including from foreign investors. We went with what we thought was the best new owner for the property," Stone said. "You went from one long-term owner to the next."

One Shell Square was the first skyscraper built on Poydras Street, paving the way for the corridor to become the modern commercial avenue of New Orleans. Completed in 1972, One Shell Square was the tallest building in the region until the Westin Peachtree Plaza in Atlanta surpassed it in 1976.

MetLife recently completed a $40 million renovation of the property.

CommonWealth bought the 1.25 million-square-foot property through an entity called CW Nola Properties LLC. Price per square foot was about $81.60.

The per-square-foot price of One Shell Square is less than the $90.49 per square foot a group of local investors paid for the neighboring Pan American Life Center, which sold in December for $60.9 million.

Wade Ragas, president of Real Property Associates in Metairie, said office towers in New Orleans sell for less than in other cities because the rents are lower. But, he said, they're a good investment because office tower occupancies are strong and prospective owners don't have to worry about a new developer coming along, building a tower and stealing their tenants because it would cost more to build new than buy an existing building.

During the second quarter of this year, Class A office space downtown rented for an average of $17.89 per square foot. One Shell Square was 87.8 percent occupied in the second quarter, according to an office leasing report by Bruce Sossaman of Equity Office Properties. Third quarter figures will be out in a few weeks.


Information from: The Times-Picayune,