Mortgage market troubles give local tenants leverage
Among the relics left behind by failed mortgage lender First Magnus Financial Corp. is plenty of prime office space.
That includes about 45,000 square feet in Williams Centre, near East Broadway and Craycroft Road, and about 70,000 square feet in the company’s custom-built headquarters at 603 N. Wilmot Road.
On top of that, there might be as much as 200,000 additional square feet from former retail lending branches vacated by First Magnus, said Michael Gross, office specialist for Tucson Realty & Trust Co.
That all adds up to a pretty significant amount of space in the Tucson market, and much of it is top-of-the-line, local office-space brokers said.
The headquarters, owned by First Magnus Chairman and co-founder Thomas Sullivan Sr., boasts amenities such as air-conditioned executive parking, fingerprint- and iris-scanning security features, and glassed-in conference rooms, said leasing agent Larry K. Lewis of Town West Realty Inc. Town West’s development company handled the design and construction of the headquarters in 2004.
“It was designed for a very successful company that was doing well,” Lewis said.
Now that many mortgage firms have contracted or collapsed altogether, the additional office space could give tenants more negotiating power in their leases, brokers said.
Before First Magnus’ sudden collapse in August, “the landlords could dictate lease rates and not have to give any concessions to speak of,” said Rick Kleiner, office specialist and principal of Picor Commercial Real Estate Services. “I think that’s switched in the last 60 days.”
First Magnus fired virtually all of its more than 5,500 employees nationwide and filed for bankruptcy in August.
Now the headquarters building is on the market at $22.50 per square foot plus utilities and maintenance costs, which one broker called “a bargain” considering the building’s features.
“There’s nothing else close to those amenities (in Tucson),” Kleiner said.
The leasing brochure describes the headquarters as “ideal for professional call center.”
In Williams Centre, the bulk of the First Magnus space was in a gray granite building along East Broadway that was adorned with a large “First Magnus” sign until about a month ago, said Peter Casey, a leasing director for landlord The Colton Co. of Irvine, Calif.
The going rate at the Colton-owned Williams Centre buildings is $26 per square foot, including maintenance, utilities and other costs.
Lewis and Casey said the former First Magnus buildings have attracted plenty of interest from local and national tenants. Casey said several leases are in the pipeline for the Williams Centre space, and one tenant, a bank, already has signed on for about 7,000 square feet.
Other brokers, however, said it might be difficult to find new occupants for the headquarters building, which was not designed to be broken up among multiple users.
The level of quality for all of the First Magnus locations might also work against landlords, said Gross, of Tucson Realty & Trust.
“Most Tucson companies can’t afford that kind of rent,” he said.
There may also be more vacancies in the future resulting from a slowdown in the mortgage, real estate and title insurance businesses, said David Volk, of CB Richard Ellis. Some of those businesses already are looking to sublet portions of their space, he said.
“It might just be a little bit too soon to tell how much fallout there’s going to be,” he said.
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