Boston company buys Union Trust Building in Downtown Pittsburgh at sheriff's sale
March 3, 2014 11:09 PM
The Union Trust Building facing Grant Street, Downtown.
By Mark Belko / Pittsburgh Post-Gazette
Jonathan Davis grew up in Squirrel Hill, graduated from Taylor Allderdice High School, and now, 44 years later, is the proud owner of a Downtown landmark.
Mr. Davis is CEO and founder of The Davis Companies, a Boston-based real estate investment and development firm that purchased the Union Trust Building for $14 million at a sheriff sale Monday, outbidding lender SA Challenger.
"Our primary motivation was economic. The sentimental motivations are sort of icing on the cake," Mr. Davis said hours after his company gained control over the property, built nearly a century ago by industrialist Henry Clay Frick.
While The Davis Companies owns and manages properties in 12 states, mostly in the Northeast, the Union Trust purchase will be its first in Pittsburgh. It has acquired a building that has fallen on hard times in recent years. It is nearly two-thirds empty and in dire need of upgrades.
But the building's woes did not scare off Mr. Davis, who said his company specializes in buying high-quality buildings that have fallen into financial distress. It had been looking to get into the Pittsburgh market for some time and saw the Union Trust Building as the perfect opening.
He described the ornate building with marble floors and terra-cotta walls as a "large, architecturally significant, very well-located property desperately in need of a new vision ... in a great city that's undergoing maybe its third or fourth renaissance."
"I really felt this was the right time to strike," he said.
Mr. Davis and his company will have their work cut out for them.
The 11-story, 517,376-square-foot building is only 39 percent leased, mainly by Siemens Corp. Former owner 501 Grant Street Partners stated in a bankruptcy filing last year that the property was "in a state of disrepair" with "significantly below market leasing rates resulting in a lack of rental revenue." One prospective owner had planned to spend $8.2 million to upgrade elevators, install a chilled water plant and make other improvements.
Mr. Davis said his company is prepared to make a "substantial capital investment" in the structure, but isn't sure exactly how much yet.
"The number you've seen in the bankruptcy filings is just the beginning of the money that needs to be spent," he said. "It's going to require a lot of capital."
He's not certain what the future holds for the Union Trust Building. The "logical" choice would be to keep it as office space with street-level retail but his company also is looking into the possibility of a hotel or residential uses.
"We're looking at a variety of alternatives," Mr. Davis said.
In securing the building, The Davis Companies outbid SA Challenger, an affiliate of U.S. Bank, which won a $41.4 million judgment against 501 Grant Street Partners in 2012, triggering the foreclosure. William Kelleher, attorney for SA Challenger, declined comment after the sheriff sale.
SA Challenger got the right to proceed with the sheriff sale in December when a U.S. bankruptcy judge in Los Angeles lifted a stay that had prevented it from going ahead. She did so after dismissing a 501 Grant Street Partners bankruptcy filing.
The $14 million the Boston company paid for the property not only is well below the judgment but lower than the $24.1 million Michael Kamen and Gerson Fox, the two principals in 501 Grant Street Partners, paid for it in 2008. An appraiser hired by SA Challenger valued the property at $22.6 million.
If it sounds like a bargain, Mr. Davis isn't doing any gloating. "I don't know whether it's a bargain or not. Time will tell," he said.
The Union Trust Building, a Flemish Gothic structure designed by famed architect Frederick J. Osterling, opened in 1917 as a four-story shopping arcade with 240 shops on lower levels and 700 offices above.
Its defining feature is a central rotunda with a stained-glass dome. Besides the marble and terra-cotta inside, there are mosaic tile ceilings and stained glass windows at both of the main entrances.
Founded in 1976, The Davis Companies owns or manages more than 100 office, retail, industrial, multifamily and health care/bioscience properties concentrated in New England and the northeast but stretching as far south as Texas and as far west as Colorado.
Mark Belko: email@example.com or 412-263-1262. First Published March 3, 2014 11:28 AM
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