Riverstone Properties acquires The James Center for $108 million
Call it hometown pride combined with the opportunity to buy an iconic office complex at a good price in a prime location. Those were the makings of a deal Riverstone Properties couldn’t pass up.
The real estate arm of Bill Goodwin’s Riverstone Group announced Thursday that it had acquired the 1-million-square-foot James Center complex in downtown Richmond for $108 million.
Goodwin is one of Richmond’s best-known businessmen and philanthropists, and Riverstone has a reputation for restoring properties to their former grandeur. Millions in renovations are planned for the three office towers on East Cary Street, said Jeff Galanti, a principal with Riverstone Properties. “When we say Class A, we mean Jefferson Hotel Class A,” he said, referring to one of Richmond’s premier hotels.
Goodwin’s private, family-owned business owns and operates luxury hotels including the Jefferson, Kiawah Island Golf Resort in Kiawah Island, S.C., and The Sea Pines Resort in Hilton Head, S.C.
Riverstone Properties is well acquainted with The James Center, because it was a tenant there for nearly 20 years before moving in October 2015 to Gateway Plaza, a new skyscraper built just across the street. “We are keenly aware of its qualities and of the areas that need to be improved for the property to reach its full potential. We are working with designers on updates to the lobbies, common areas, elevators and other areas which have not been meaningfully updated since their original construction in the mid-1980s,” said Chris Corrada, another principal at Riverstone.
Just to replace the buildings’ 33 elevators, which are near the end of their life cycle, represents a huge investment. The principals said these costs were taken into consideration when Riverstone decided to buy the buildings. “To build something like that today, you would spend $300 to $400 million. So buying it for $100 million and investing another couple hundred million is still a great, great opportunity,” said Corrada.
Galanti said Riverstone is “not looking to put some Band-Aids on it and sell it in three or four years. With Richmond being our hometown and with our headquarters here, we are going to bring it to true Class A status and to hold it indefinitely.” The company has retained the Richmond office of Colliers International as the leasing agent for the buildings.
Holliday Fenoglio Fowler (HFF) marketed the property on behalf of the seller, LNR Partners LLC, a commercial mortgage special servicer. The complex was returned to the lender after the previous owner, New York-based JEMB Realty, defaulted on two loans totaling $150 million. At one point last year, the property was scheduled to be sold at a foreclosure auction, but the auction was canceled. The property is currently valued at about $132 million.
Built from 1984 to 1986, The James Center has three Class A office towers, the 21-story One James Center, the 22-story Two James Center and the 14-story Three James Center along with ample onsite parking for tenants. It also has two restaurants and access to other restaurants through its connection to the nearby Omni Hotel. Galanta said Riverstone hopes to attract new retailers and dining options to the property’s ground floor.
Currently, the buildings are about 70 percent leased. Major tenants include Wells Fargo, Davenport & Co., Mercer, Union Bank and Trust, Xenith Bank and The Virginia Economic Development Partnership.
With its location in Richmond’s central business district, close to the state Capitol and the James River, the complex “has the best location in the downtown Richmond office market. The opportunities for its improvement and growth are remarkable,” said Galanti.
The property was on Riverstone’s radar for about two years. “Since we started this process, there have been some significant developments in the downtown market,” noted Corrada.
CoStar Group announced in October that it’s leasing the top four floors of space in the WestRock Co. building downtown, the former MeadWestvaco corporate headquarters. It plans to put a new headquarters there for operations and research. Plus, SunTrust Bank decided to keep its Virginia division headquarters on East Main Street downtown rather than move into a new office tower planned at The Locks development nearby.
“In the span of a couple of months, two large blocks of contiguous space were off the market,” said Corrada, spaces that would have competed with the James Center for tenants. Currently, the James Center has about 170,000 contiguous square feet of space where the McGuireWoods law firm used to be located.
Even without those developments, Riverstone Properties would have proceeded with the purchase. “Iconic assets don’t come along that often,” said Corrada.
The new owner doesn’t expect current tenants to have to relocate during the renovations. And Riverstone plans to continue the annual holiday tradition of the “Grand Illumination” of the James Center with its display of reindeer and holiday tree.
Competition for the building was strong, said Dek Potts, who led the HFF investment sales team. “We had more than a dozen tours with real capital players. We had a lot of good capital out of New York and Boston and some of the current owners who recently bought in downtown Richmond played and played hard. Riverstone ended up on top. There was a realization that this was a centralized location, and the real estate itself offered great potential for someone meeting the long-term vision.”