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Spec space arises out of recession

Portman brings Class A offices to Stonewall Street

Portman Holdings had other plans for 615 S. College St., but the company was fortunate enough to have scuttled plans for condos just before the market crashed in 2008.

Atlanta-based Portman Holdings recently broke ground on 615 South College, a 19-story office tower. Rendering courtesy Portman Holdings

Atlanta-based Portman Holdings recently broke ground on 615 South College, a 19-story office tower. Rendering courtesy Portman Holdings

That’s according to Portman Holdings Director of Leasing Travis Garland, who talked about the metamorphosis of the 270,000-square-foot speculative office tower at a luncheon held Tuesday by the Charlotte chapter of Commercial Real Estate Women.

Portman Holdings developed the adjoining Westin Charlotte Hotel in 2003, and long envisioned adding mixed-use or residential space to the top of the hotel’s underground parking deck. In 2005-06, the company took a look at condos, but demurred. Then the recession hit, and it wasn’t until 2012 that Portman Holdings “began dusting off the plans” for offices.

The company opted to go in that direction because the hotel better complemented office space.

Dubbed 615 South College, the building will feature 19 stories of Class A office space renting at $33-34 per square foot, a fitness center with locker rooms, a conference facility and floor-to-ceiling windows. The design includes four two-story balconies and an elevated green plaza connecting the tower to the Stonewall Lynx station and a 47,000-square-foot Whole Foods supermarket that is slated to open in 2017. A minimum amount of retail, about 2,500 square feet, is planned for the site.

The building will have two main entrances: one directly off College Street, and the other facing the hotel’s motor court. The developer hopes to achieve LEED Gold certification, and is sure it will garner at least Silver level, said Norris Hunt, vice president and senior project manager for architectural firm John Portman & Associates.

Built at a cost of $122 million, Portman Holdings expects to complete the project in the first quarter of 2017. Cranes are scheduled to begin work in December.

The building’s amenities, and its proximity to light rail and parking “puts us in the game” for competing with the lion’s share of office development that has taken place in the suburbs, said Trinity Partners Senior Leasing Agent John Ball. He described Charlotte as an attractive rental market because its rates are less expensive than in other major cities such as Atlanta and Denver.

Class A rents uptown averaged $29.89 per square foot in the second quarter, while the vacancy rate on premier space was at 9.3 percent, according to local analytics firm Karnes.

The addition of 615 South College and similar projects on Stonewall Street will fill a void in available Class A office space uptown, Ball said.

Nearby development includes Crescent Communities’ plans for a 27-story office building on 3 acres the company owns at South Tryon and Stonewall streets. And last December, Babson Capital Management broke ground on a 25-story office tower, 300 South Tryon. The global investment management company will anchor its headquarters at the site, occupying some 200,000 of the tower’s 630,000 square feet. It was the first office project to launch in uptown since the recession began.

Getting 615 South College off the ground was not a seamless affair, however. Garland said the biggest challenge was fund sourcing.

“Debt was a challenge in allowing us to go spec,” he said. Traditional lending institutions, such as banks, were willing to back the project with the caveat that it be 60 percent to 65 percent preleased, he said.

So Portman Holdings took an alternate route, and secured equity financing for the project from China Orient Summit Capital, which invests in and manages real estate on behalf of institutional investors. Real estate finance and investment manager PCCP is the lender. PCCP has offices in New York, San Francisco and Los Angeles.

Despite recent increases in construction costs, Garland is optimistic on uptown’s future. He said he expects to see more projects such as 615 South College coming to the central business district.

Portman Holdings has developed more than 50 million square feet of real estate globally, focusing on hospitality, office and mixed-use properties.

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