Sources: U.S. Steel pulls out as anchor tenant of planned $238 million Oxford Development high-rise
October 28, 2013 10:42 PM
350 Fifth Avenue High-Rise
33-story skyscrape to be built on Smithfield Str.
Oxford Development Company
33-story skyscraper that Oxford Development Company proposed to build
By Mark Belko and Len Boselovic / Pittsburgh Post-Gazette
For months, Oxford Development Co. has been a persistent suitor of U.S. Steel as part of a bid to build a gleaming new skyscraper Downtown.
But in the end, the courtship failed.
The troubled Pittsburgh steelmaker has decided against anchoring Oxford's proposed $238 million, 33-story high-rise on Smithfield Street between Forbes and Fifth avenues, according to sources with knowledge of the situation.
With the decision, it appears much more likely that U.S. Steel will stay at its longtime home in U.S. Steel Tower, where its lease expires in 2017. The company had been considering a host of other options, including a possible move to Findlay.
The decision against pursuing the Oxford venture is not surprising, given U.S. Steel's financial woes.
President and CEO Mario Longhi, a former Alcoa executive who took over Sept. 1, is conducting an exhaustive study of how to cut costs and increase the efficiency of the company, which has not had a profitable year since 2008.
The steelmaker on Monday reported a third-quarter loss of $1.79 billion, reflecting a $1.8 billion noncash charge to write down the value of the company's Texas and Canadian operations.
Excluding the charge, the report wasn't as bad as Wall Street expected, but revenue was below predictions. Its stock fell.
The net loss in the quarter through September amounted to $12.38 per share. Excluding the impairment charge, the loss came to 14 cents per share, not as bad as the 45 cents per share loss expected by analysts polled by FactSet.
U.S. Steel's stock dropped $1.22, or 5.2 percent to $22.20 in trading following the release of the earnings report.
U.S. Steel sent shock waves throughout the political and real estate community 19 months ago when news broke that it might be considering a move to the suburbs, specifically a 116-acre parcel off McClaren Road owned by District Judge Anthony Saveikis.
But earlier this year, the company decided that it wanted to remain in the Golden Triangle, either in a new building or at U.S. Steel Tower on Grant Street, its home for more than four decades, where it currently has about 1,000 employees on 14 floors.
Other sites that have been under consideration include the Buncher Co.'s proposed $450 million Riverfront Landing development in the Strip District. At one point, the site was considered the favorite because it was large enough to accommodate the campus-like headquarters U.S. Steel was said to prefer.
There also was talk that U.S. Steel might be interested in the former Civic Arena site, where the Pittsburgh Penguins hockey team is proposing a 28-acre residential, office and commercial development.
More recently, the Oxford project appeared to take precedence. But U.S. Steel's decision deals a blow to Oxford's efforts to move the high-rise from the drawing board to construction.
Since announcing the project in May 2012, Oxford has repeatedly delayed a final decision on whether to build it or to do a $40 million renovation of its existing building at the site while it searched for a possible anchor tenant. Although its focus recently has been on U.S. Steel, Oxford also has talked to other companies about potentially anchoring the project.
At this point, Paul Horan, a founding principal at Colliers International, a Downtown real estate company, said he expects Oxford to move forward with the renovation project instead of the high-rise.
"It's still a quality location and the designs that have been contemplated for the renovation I felt were very powerful" and would generate interest from prospective office tenants, he said.
Mr. Horan said he is not aware of any local companies looking for headquarters space Downtown.
Nonetheless, Peter Sukernek, vice president and general manager of Howard Hanna Commercial Real Estate Services, doesn't see Oxford giving up on the high-rise easily.
"The way they have approached this over the last year, they seem to have a very positive commitment to doing everything they can to build that building," he said. "If one tenant says no, they have to keep trying and look for another one."
Mark Belko: firstname.lastname@example.org or 412-263-1262. Len Boselovic and The Associated Press contributed.
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