Agreement Reached on First Interstate Plaza Sale

SAN DIEGO â€”  The owners of First Interstate Plaza, a two-year-old downtown high rise that is less than half full, have reached agreement to sell the 23-story building to a joint-venture partnership headed by The Koll Co.

Sale of the First Interstate Plaza by Great-West Life Assurance Co. of Winnepeg is expected to close Oct. 31, according to sources familiar with the transaction.

The Koll Co.’s partner in the project will be Denver-based Beta West Properties, a subsidiary of U S WEST, one of the seven regional holding companies formed from the divestiture of AT&T.;

Neither Koll nor Beta West officials on Wednesday would confirm that an agreement to buy the building had been reached. However, both companies said that an announcement about the facility would be issued later this month.

Last week, First Interstate Plaza developer Bowlen Holdings--which built the plaza for $83 million--sold its 25% interest in the building to Great-West for an undisclosed amount. That transaction set the stage for the outright sale of the skyscraper, according to real estate industry sources.

The law firm of Gray, Cary, Ames & Frye, which occupies about 115,000 square feet on six floors of the building, also owns 25% of the plaza. The firm’s equity will be included in the sale to The Koll Co. and Beta West.

Gray, Cary invested no capital in the plaza in exchange for its equity position, so its participation in the sale represents virtually all profit.

If the transaction is completed, the plaza will become the third downtown office building owned by Koll.

The Newport Beach-based real estate firm--which made an unsuccessful attempt to buy the plaza late last year--also owns the Central Savings Tower and the Wells Fargo Bank building.

The Central Savings facility is currently 93% occupied and the Wells Fargo skyscraper is 90% filled, according to Koll officials.

By contrast, the First Interstate Plaza is only 47% leased.

Of the 504,793 square feet at the six-sided, carmine-red plaza, 463,099 are leasable. At a 47% occupancy rate, that means that Gray Cary accounts for nearly 53% of the leased space.

The plaza remains an attractive investment because it is one of the few first-class office buildings downtown with whole floors still available.

Downtown office occupancy rates climbed to 84% as of Sept. 30, up from 75% at year-end 1985, according to Grubb & Ellis research coordinator Ed Billings.

And, by all indications, the market continues to tighten, he said.

The plaza purchase would mark Beta West’s first entry into the San Diego market. Last May, it purchased a 110,000-square-foot office building in Sacramento, according to Adrienne Thiele, director of marketing and corporate relations.

Beta West’s total real estate portfolio is about $600 million, she said.

Great-West’s sale of the plaza is in keeping with a board of directors mandate to sell off the company’s California real estate holdings.

Earlier this year, Bowlen Holdings--owned by Patrick Bowlen, owner of the Denver Broncos football team--tried to buy the plaza from Great West, but the two firms couldn’t agree on a purchase price.