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Wall Street Journal / Biz - Money

Pittsburgh Draws a Big Bet on Downtown Revival

A New York investment firm has put $127.5 million of new debt on Nova Place, a Pittsburgh office complex that has roots dating back to a misguided 1960s urban renewal project.
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Peter Grant

A New York investment firm has put $127.5 million of new debt on a Pittsburgh office complex that has roots dating back to a misguided 1960s urban renewal project.

Faros Properties LLC borrowed the money, backing it primarily with Nova Place, which was converted from a failing 1.2 million square foot urban mall into office space in the early 1990s. The lender of the five-year, floating rate loan was Wells Fargo & Co., according to Holliday Fenoglio Fowler LP, which placed the debt for Faros.

The deal shows that lenders still have a healthy appetite for debt backed by properties with high occupancy, strong ownership and values that are higher than the loan amounts.

Located near Pittsburgh’s now-trendy North Shore area, Nova Place is 86% occupied with tenants including PNC Bank, according to Holliday Fenoglio.

The collateral on the loan includes a nearby office building of about 100,000 square feet at 106 Isabella St. The total portfolio is worth more than $175 million, according to people familiar with the property.

“It’s centrally located with good tenants and long-term leases,” said Nick Matt, a Holliday Fenoglio senior managing director. “If you have all those things going for you, there’s money for mortgages.”

For many years, though, the complex didn’t have much going for it. Nova Place was developed as Allegheny Center, a mixed-use complex including a shopping mall that planners hoped would revitalize the area. The project, developed by Alcoa Properties Inc., involved the razing of more than 500 buildings, many that were taken through eminent domain.

But some of the residential development envisioned in the urban renewal plan never materialized and the retail suffered badly from suburban competition. The complex also was hurt by the decline of the steel industry and the Pittsburgh economy in the 1980s and 1990s.

The renaissance of the North Shore area began more than 15 years ago with the demolition of Three Rivers Stadium and the construction of the PNC baseball park and Heinz Field football stadium. A wide range of other entertainment and retail attractions began to blossom in the area known for its views of downtown Pittsburgh on the other side of the Allegheny River.

The common area of the Nova Place office complex. Photo: Faros Properties

Faros, which also has been active in buying residential property in Pittsburgh, purchased the complex in 2015 for $67.5 million and renamed it Nova Place. Faros also spent tens of millions of dollars upgrading and finding tenants for the complex.

The new loan replaces about $65 million of Wells Fargo debt that had been on the property. Numerous lenders expressed an interest in the deal that was priced “at a tight spread over Libor,” according to Mr. Matt.

“It was a very competitive situation,” he said.

Write to Peter Grant at peter.grant@wsj.com

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