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EQT Plaza sold for $99.2M; deal avoids transfer tax

| Tuesday, Dec. 4, 2012, 6:10 p.m.

A Raleigh real estate investment company purchased its second landmark office building Downtown, closing Tuesday on the 32-story EQT Plaza skyscraper for $99.2 million.

Highwoods Properties Inc. said the acquisition cost includes $8 million in spending on improvements to the building, which houses energy company EQT Corp. and other tenants. In September 2011, Highwoods' bought PPG Place for $214.1 million, a price that included improvement costs.

“We are thrilled to expand our footprint by 40 percent in Downtown Pittsburgh with the acquisition of another Class A office building,” CEO Ed Fritsch said.

Highwoods said it acquired 100 percent of building owner Liberty Avenue Mezzanine LLC, a Delaware holding company.

The structure of the deal means that the company won't pay a 4 percent transfer tax that normally applies to real estate deals in Pittsburgh, Fritsch said.

“It was not an avoidance maneuver,” he said. The only way to acquire the building was to buy the holding company, he said. “There was no deed for us to acquire.”

The avoidance of transfer taxes in deals for expensive office buildings in recent years has sparked criticism from government officials. A new state law goes into effect Jan. 1 to close a loophole known as an “89-11” sale, in which the seller conveys 89 percent of its interest in a real estate corporation, rather than the property itself, and the buyer can buy the remaining 11 percent after three years.

The 2011 sale of the 64-story U.S. Steel Tower, the city's tallest office building, for $250 million avoided the transfer tax through the 89-11 loophole.

Fritsch said Highwoods' acquisition of EQT Plaza was not an 89-11 deal.

Highwoods expects the building's occupany rate to increase to 95.9 percent by the third quarter 2013, up from 92.2 percent now as new tenants come in and existing ones expand, Fritsch said.

He declined to identify the new or expanding tenants.

In addition to EQT, the building's other large tenants are insurer AIG and law firms Cohen & Grigsby, McGuireWoods and Fox Rothschild.

The company hopes to add other Pittsburgh property to its portfolio and for opportunities to develop new buildings, though Fritsch declined to identify anything specific.

Highwoods wants to expand, he said, but it will be patient and “not just bulk up to bulk up.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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