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PORTLAND-The General Services Administration on Tuesday went into detail for GlobeSt.com regarding its recent lease commitments at 1201 NE Lloyd Blvd. The 222,777-sf class A office building in the city’s Lloyd District was completed in early 2002 but remained largely un-leased until this year and now is nearly 90% occupied.The biggest chunk of space in the building has been leased by the GSA, which handles the space needs of most of the major federal government agencies. Over the last few months, the GSA has inked no less than four leases in the building totaling 116,000 sf at annual rates in the $24 range for the Department of Agriculture, the Federal Bureau of Investigation, the Department of Justice and the National Oceanic and Atmospheric Association.GSA executive director Bill DuBray tells GlobeSt.com that the reason the GSA did not simply renew leases at the agencies existing locations is a result of new seismic-related construction standards that came about after the Northridge (California) earthquake. “If there are buildings available that meet the (seismic) criteria and we receive a reasonable offer, we will go to that building,” says DuBray.Indeed, DuBray says One Main Place, which houses the Department of Agriculture, wanted to retain their tenant but could not “because they could not certify that they comply with the new criteria.” Other older CBD office buildings that are losing their federal tenants to 1201 Lloyd include Crown Plaza II (Built in 1972) and the Forum Building (Built in 1913), according to the lease details provided by the GSA.On behalf of the DofA, whose lease at One Main expires in November, the GSA inked a 10-year, 57,494-sf lease at 1201 Lloyd at a rate of $24.92 per sf per year. NOAA, whose lease at the Forum Building (525 NE Oregon) expires in September, is taking 25,612 sf at 1201 Lloyd for 10 years at a rate of $24.14 per sf per year. The Federal Bureau of Investigation, opening a new office in the city, is taking 21,646 sf in the building for a five-year term (with one five-year option) at a rate of $24.18 per sf per year. Lastly, the Department of Justice’s Alcohol, Tobacco & Firearms unit is relocating from the Forum Building, is taking 12,048 sf at 1201 Lloyd for a five-year term (and one five-year option) at a rate of $24.28 per sf. The leases, which commence later this year and early next year, come on the heels of a 51,000-sf lease by Integra Telecom in January that commenced in June as the first significant tenant in the building. Additionally, late last week the building landed yet another federal agency, the Bureau of Reclamation, which will take about 5,800 sf in the building. The terms of that deal were not immediately available, but they are believed to be comparable to the other agency leases.All told, leases totaling nearly 80% of the building have been signed since the start of the year, turning a struggling asset into a solid performer in a matter of months for building owners Transworld Properties of Houston and Island Capital, the New York-based real estate investment firm formed by Insignia’s former investment and development executives last year, concurrent with Insignia’s merger into CB Richard Ellis. Island Capital bought out all of Insignia’s general partnership and limited partnership interests at the time of the merger, which is how it came to the general partner in 1201 Lloyd.Barry Nelson, president of Island Capital’s development group, tells GlobeSt.com that the leasing agents for 1201 Lloyd, Dan Swift and Lana Baldock of CB Richard Ellis have been working to land the federal agencies for quite some time. “With a new building on a light rail stop, we knew we were absolutely in their sweet spot,” says Nelson. “(Swift) and (Baldock) did an absolutely fantastic job of dogging those leases.”As a result, a building that late last year was worth probably less than it cost to build is now worth approximately $50 million or $224 per sf. “We’ve just created tremendous value,” says Nelson.With that in mind, a sale might be on the horizon, at least for Island Capital’s minority share of the property. Nelson acknowledges, “It may be an appropriate time” to sell the its interest in the property. While no decision has been made, Nelson says it‘s something that will be given some thought in the coming weeks. “Our original investment objectives did not contemplate a long-term hold,” he says.Moreover, thanks to low interest rates and a troubled stock market, Nelson says the investment market for office buildings like 1201 Lloyd–newer and well leased to high-credit tenants–has improved dramatically. “There are a lot of dollars looking for opportunities,” says Nelson. “It’s created some downward pressure on cap rates.”

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