CommonWealth REIT, a Newton, Mass.-based real estate investment trust, which owns the 28-story, 373,516-square-foot Milwaukee Center building in downtown Milwaukee, is under contract to purchase the 35-story, 430,800-square-foot 100 East Wisconsin Ave. building, also located in downtown Milwaukee, from Northwestern Mutual Life Insurance Co., according to sources.
Tenants in 100 East Wisconsin, the second tallest building in the city and the state, were recently notified about the deal.
If the sale is completed, CommonWealth REIT will control 804,316 square feet of office space in downtown Milwaukee. Most of that space is occupied. The 100 East Wisconsin building is about 95 percent occupied and the Milwaukee Center building is about 90 percent occupied.
A representative for CommonWealth REIT could not be reached for comment.
A spokeswoman for Northwestern Mutual declined to comment.
"We don’t comment on any real estate transaction until it is finalized," said Jean Towell, the Northwestern Mutual spokeswoman.
The 100 East Wisconsin building has an assessed value of $65.5 million, or about $152 per square foot, according to city of Milwaukee records.
In 2008, CommonWealth, then known as HRPT Properties Trust, purchased the Milwaukee Center building at 111 E. Kilbourn Ave. from Transwestern Investment Co. for $53 million, or about $142 per square foot.
A Milwaukee commercial real estate source said the sale of the 100 East Wisconsin building is expected to be higher than the per square foot sale price of the Milwaukee Center building.
The tenants in the 100 East Wisconsin building include: Michael Best & Friedrich, which leases 112,684 square feet of space; Wells Fargo Bank, 44,670 square feet; Marcus Corp., 41,219 square feet; Cleary Gull Holdings Inc., 23,540 square feet and PricewaterhouseCoopers LLP, 22,894 square feet. John Hawks Pub is also located in the building.
It remains to be seen if CommonWealth will decide to increase the rent at 100 East Wisconsin. Rents in the building vary from $7 to $18 per square foot. The REIT might decide it needs to increase the rent to recoup its investment in purchasing the property. However, the weak economy could make a rent increase problematic.
“It’s very hard to raise rents when the economy (stinks),” said Mike Mervis, vice president of Milwaukee-based Zilber Ltd. “I would be very surprised if you saw any rent increases.”
Construction of the 100 East building was completed in 1989. It was developed by a joint venture of Northwestern Mutual and Charlotte, N.C.-based Faison Associates. Northwestern Mutual now owns 100 percent interest in the property.
CommonWealth REIT primarily owns and leases office buildings. According to its web site, as of March 31, CommonWealth owned office and industrial properties worth a total of $6.6 billion with about 67 million square feet of space, located in 35 states and Washington DC.
CommonWealth REIT was previously known as HRPT Properties Trust. The company changed its name and began trading on the New York Stock Exchange under the ticker symbol CWH on July 1.