The Chase Tower downtown office building has been sold to a Florida real estate firm for $11.95 million.
The 14-story building and adjacent parking garage were bought by In-Rel Properties. It is the company's first property in Kentucky.
"We are really drawn to markets that have significant economic anchors — obviously the University of Kentucky is one — and a highly educated work force," said CEO Mukang Cho.
The company will continue to use Lexington commercial real estate firm NAI Isaac, which announced the deal, to manage the property locally.
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The deal offers a new start for a property that has suffered issues in recent years. In 2009, Wells Fargo filed a suit against the building's complex ownership, which includes more than 30 entities, according to data from the Fayette County Property Valuation Administrator's office. An order was issued Oct. 24 allowing the sale of the property, according to Fayette Circuit Court records.
That suit led to NAI Isaac being appointed receiver of the property to keep it in good shape during the dispute, NAI Isaac President Al Isaac said.
"It's going to be good for downtown Lexington," Isaac said of the sale. "It's going to be good for Chase Tower.
"These people are committed to making the improvements to Chase Tower that will allow us to fill the rest of the tower up."
The tower's occupancy rate is a little more than 70 percent, Isaac said. Built in 1973, the building took a hit when JPMorgan Chase announced in 2007 that it would realign its regional loan operations and eliminate more than 400 jobs here.
Chase remains the largest tenant in the building at East Main Street and Martin Luther King Jr. Boulevard, Isaac said. Others include Kentucky Spirit Health Plan and the McBrayer, McGinnis, Leslie & Kirkland law firm.
The tenants "provide some stability for the building, but there's also a good amount of vacancy that we can lease," Cho said, explaining the building's appeal and growth potential.
Cho said the company is planning between $1.5 million and $2 million in renovations that will include aesthetic improvements to the lobby and upgrades to mechanical systems.
One measure of the sale suggests Cho's firm received a stellar deal. The price per square foot of office space equates to roughly $50, which is far lower than most other commercial real estate sales in the area, said commercial real estate broker Tim Haymaker. Many professional office deals in the area can range from $100 per square foot to $150 per square foot, Haymaker said.
"People need to look beyond the price so they don't use this as a comparable sale when it was a very convoluted deal to unwind," Haymaker said. "You don't want people thinking your building is worth $50 a square foot."
Isaac noted the building sales price is an "outstanding value" for In-Rel Properties.
"Even when you take into consideration the investments they're going to be making in the property, they're going to end up with an outstanding value in the property," Isaac said.
The sale includes the neighboring parking garage that was the site of a 2006 tragedy. Bank employee Stephanie Hufnagel, who was eight months pregnant, was crushed by a dislodged concrete panel that had been struck by a pickup truck. A suit filed by Hufnagel's family was later settled.
The garage underwent a series of repairs after Hufnagel's death and has seen further improvements in the past couple of years.
Isaac said nearly $1 million was spent on reinforcement and refinishing projects suggested by an engineering study that his firm commissioned in its role as manager of the property.
The site has 406 parking spots, plus 50 in a nearby surface lot.
"There are not too many properties downtown that control the amount of parking that Chase Tower does," Isaac said. "It's in a perfect location."
Its sale also shows increased interest in Lexington and its economy.
"This is the second eight-figure deal we've seen in Lexington in the past two weeks," said PVA David O'Neill, referencing the $52.5 million purchase of the Forty/57 apartment complex off Man o' War Boulevard near Nicholasville Road. "That is an indicator that serious commercial property investors have confidence in this market in the long run, and that there are investment opportunities here."
It might foreshadow additional investment, too, by In-Rel Properties, which also has properties in Alabama, Florida, Georgia, Oklahoma, South Carolina and Tennessee.