URA plans to buy former Art Institute building
Property would cost $27.5M and house city offices
City Urban Redevelopment Authority board members approved a plan Monday to buy the former Art Institute of Pittsburgh building Downtown for $27.5 million, a property that a Chicago developer acquired for $10 million four years ago before spending millions more to upgrade it.
The 5-0 vote was the first step in a bid to move the URA, the Pittsburgh Housing Authority and some city offices to the location at 420 Blvd. of the Allies from their home in the aging John P. Robin Civic Building at 200 Ross St.
In backing the plan, URA officials said the move would better assist the public with larger meeting spaces and a one-stop shop for permits, licenses, inspections and other city services while providing a nicer, more collaborative work environment for employees.
To fund the acquisition, the city plans to borrow up to $40 million — enough to finance the purchase and to build out the space needed for its staff, which also includes the planning and zoning departments.
Robert Rubinstein, URA executive director, acknowledged that the investment is a sizable one. But he maintained it was worthwhile, given that it would cost about $39 million to renovate the Robin Building to bring it up to acceptable standards.
He said that the Robin Building is in a dilapidated state, with inoperable windows; poor air conditioning, heating and elevators; inefficient floor layouts; and other deficiencies. Board Chairman Kevin Acklin said the structure doesn’t even comply with some fire and building code requirements.
The city, URA and Housing Authority each would own a third of the former Art Institute building.
They are buying it from M&J Wilkow, which purchased the nine-story structure for $10 million in 2014, according to Allegheny County real estate records, and spent another $11 million to renovate it.
Gerry Dudley, a CBRE executive vice president who assisted the URA in the search for a new space, said the price the entities are paying, at $174 a square foot, is in the mid to upper range of the market,
though he noted there were not many comparables.
By contrast, Shorenstein Properties paid $169 a square foot in buying the iconic 879,000-square-foot One Oxford Centre skyscraper on Grant Street for $148.7 million in 2016.
But Mr. Dudley said if some of the leases in new buildings on the North Shore or the Strip District were converted to the equivalent of sales, the cost per square foot would be into the $300-plus range. He noted the Art Institute building has been fully gutted and renovated with all new systems.
“We’re getting a good deal,” he said. Not everyone is so sure. City Controller Michael Lamb said he had “real concerns” about the transaction. “When I compare that sale to other buildings, we are paying a premium. That’s the concern I have,” he said.
He also worried about the pace of the sale. The URA, city and Housing Authority would like to have all approvals in place by Aug. 1 — a schedule URA officials said is being dictated by M&J Wilkow, which has potential leases it is holding up with the sale pending.
Marty Sweeney, M&J Wilkow senior vice president, could not be reached for comment.
“It just concerns me that we have a deal that is not particularly transparent and now there’s a rush to get it done and at a very high price,” Mr. Lamb said. “Those things raise a lot of red flags to me.”
He also questioned why the URA, city and Housing Authority did not look for locations in the Strip or other neighborhoods that may have cheaper space and better parking for the public and employees.
“We’re talking about a building at the top of the market. Should the city, the URA and the Housing Authority be paying for Class A office space when we are obviously using public dollars?” Mr. Lamb asked.
He added he plans to talk to city council, which must approve the purchase, about his concerns.
Gerard McLaughlin, Newmark Knight Frank executive managing director, didn’t see the $27.5 million purchase price as “an outlandish number by any stretch of the imagination.”
To buy another building and renovate it or refurbish the Robin Building could have been just as much or more costly, he said.
“I’m not sure there are many other buildings Downtown that would be a good long-term home for them. It’s already done and construction costs, quite frankly, are going to continue to go up,” he said.
Mr. Rubinstein said the URA limited its search to Downtown because there was a desire to be close to the City-County Building, which houses the mayor, city council offices and other city departments.
If the purchase is successful, it will take the former Art Institute building off the tax rolls. But Mr. Rubinstein said that would be offset by the URA plans to sell the Robin Building. The city and the authorities also will have the option to lease one floor of the Art Institute building to a third party to generate some revenue.
The parties did consider leasing space instead of buying, but Mr. Rubinstein said they did not want to be subject to increasing rents in a hot real estate market Downtown. They also considered building on vacant land Downtown, but that proved to be cost prohibitive.
If all goes according to plan, the acquisition would be finalized in September, with the new space available in perhaps less than a year.
The quest to find a new home has been more than a decade in the making. At one point, the URA board voted to sell the Robin Building to Philadelphia developer PMC Property Group for $1 million.
But that fell though when the city, URA and Housing Authority were unable to find new locations for their offices. The URA has occupied the Robin Building for more than 60 years, Mr. Rubinstein said.