Downtown office building sold for $11 million
The five-story office building at 789 N. Water St. in downtown Milwaukee was purchased recently by K&K McKinney Properties LLC from Water Street Investment LLC for $11 million. The sale price is well above the building’s assessed value of $8.24 million, according to city of Milwaukee records.
The nine-year-old, 73,250-square-foot building has 66,799 square feet of leasable space, which is 97 percent occupied. Heartland Advisors Inc. is the anchor tenant in the building, occupying the upper two floors. The other tenants are Fiduciary Real Estate Development Inc., Milwaukee Employee Retirement Systems and a Cousins Subs restaurant. The only vacant space in the building is an 1,800-square-foot space on the first floor.
Eric Rapp of Encino, Calif.-based Marcus & Millichap Investment Services represented Water Street Investment in brokering the sale of the building and Mike O’Neill represented K&K McKinney. Rapp said the buyer is a retired individual purchasing the property as part of a 1031 exchange, but declined to disclose any additional information. The registered agent for K&K is Jerry McKinney of Whitewater, according to the state Department of Financial Institutions. Under section 1031 of the Internal Revenue Code, when an investment property or a business property is sold, the owner can use the funds from the sale to purchase a similar property, and not be liable for capital gains taxes on the profit from the sale of the initial property.
The $11 million sale price for the building demonstrates that quality commercial real estate still has value, despite the problems with the overall economy, Rapp said. "We are seeing that quality buildings with low vacancy rates are still selling at fairly respectable prices," he said. "A lot of people think that everything is getting low-balled, but that is not the case for quality buildings. There are still people looking for a place to put money, and the stock market doesn’t look too good right now."
The building, located at the southwest corner of Water and Wells streets, is considered by some area real estate brokers as one of the top 8 class A office buildings in downtown Milwaukee. However the building struggled with low occupancy rates for years until the city of Milwaukee and Fiduciary leased a large amount of space last year, said William Bonifas of CB Richard Ellis.
"(The building is) in good shape now," Bonifas said.