GlobeSt.com UPDATE: Southern Co. Signs Estimated $70M Office Lease

Southern signed a 12-year, 138,000-sf lease in January 2004, as GlobeSt.com previously reported. Yesterday the utility company signed another lease for 90,000 sf and extended the master lease to 15 years with an option to occupy the remaining 32,000 sf in the $50-million building within five years. Southern starts occupying the first 228,800 sf of its lease in January.

Officials at Southern and Barry couldn't be reached by GlobeSt.com's publication deadline to learn the aggregate value of the contract. However, brokers in a position to know tell GlobeSt.com the estimated value of the 15-year deal is $70 million. They base their estimate on the building's advertised net rate of $18.50 per sf.

In an internal company memo, a copy of which GlobeSt.com obtained, Southern's project director Brian Spickard called the deal with Barry "a situation in which everybody's a winner." The reference was to a deal Southern cut with Barry that allows Southern to sublease two floors or about 60,000 sf to a client, Balch & Bingham LP.

"With this deal, Barry Real Estate has a fully leased project; Balch & Bingham achieves a Downtown presence; and Southern Co. improves on every aspect of the original deal in terms of cost, security, parking and control of our work environment," Spickard told Southern employees in the memo. He didn't, however, spell out details of the lease on parking spaces, security and total cost of the rent.

For Barry principals Hal Barry and Chris Schoen, the deal is even sweeter, Downtown office brokers intimate with the project tell GlobeSt.com. "Barry is out-maneuvering everybody Downtown and in Midtown with lower than average quoted rents in the submarkets," a broker in a position to know tells GlobeSt.com. "At its advertised net rate of $18.50 per sf, Barry is snagging many of the major tenants other building owners had hoped to rent to at rates of $21 to $25 per sf."

Richard Bowers & Co. puts the average asking Downtown class A office rent at $21.50 per sf. Colliers Cauble Co. research has the average rent at $20.77 per sf. Hal Barry and Schoen couldn't be reached by GlobeSt.com's publication deadline.

Downtown brokers in a position to know note that Barry and Schoen can offer lower rates because the project had obtained tax allocation district funding, called TAD, from the local government to fund infrastructure improvements. "That leaves them in a nice position" to lease up their buildings, a broker familiar with the project tells GlobeSt.com.

Barry and Schoen are also expected to seek similar TAD funding for their 349,000-sf 55 Allen Plaza building that broke ground in April. Ernst & Young already has signed an estimated 15-year, 137,000-sf lease at 55 Allen Plaza, as GlobeSt.com previously reported.

Barry Real Estate also plans a third 600,000-sf, 34-story office, retail and hotel structure at 50 Allen Plaza. At a total 1.2 million sf, Allen Plaza, four blocks from Centennial Olympic Park, is the second largest office site next to the 55-story, 1.25-million-sf, 1,023-foot tall Bank of America Tower Downtown.