The parent company for moving giant U-Haul is preparing to make a move of its own after closing on one of Phoenix's tallest skyscrapers to house its headquarters.
U-Haul Holding Co. paid $23.7 million for the CenturyLink office tower in the city's Midtown area in a deal that closed earlier this month, the company confirmed to CoStar News. The 25-story high-rise at 20 E. Thomas Road is Arizona's third-largest building and is located just a block away from U-Haul's existing corporate hub at 2727 N. Central Ave.
The nearly 550,000-square-foot tower will soon be renamed U-Haul Tower. The company expects to use the space to house both its moving and storage operations as well as its other subsidiaries.
The deal with the seller, an affiliate of Bank of America, will mark an expansion for U-Haul's parent. Over the next two years, the company plans to consolidate its regional workforce from a handful of nearby buildings it currently owns and move into the majority of the building with the goal of operating more efficiently under one roof.
U-Haul's acquisition marks one of the largest owner-occupier office sales in the United States and the largest in the Southwest since the early days of the pandemic, said Eric Wichterman, a Cushman & Wakefield vice chair who helped broker the sale, in a statement. He called the deal "a monumental transaction" for both the greater Phoenix area as well as the western half of the country.
"The buyer had its sights on this property to upgrade its office environment for its team members," the broker said, adding that the deal was indicative of the broader "flight to quality" trend ripping across the national office market. "This sale will cement U-Haul in Phoenix for many more years and further exemplifies a significant belief by companies in the need to have an office presence, in particular one that is high quality and highly amenitized."
The new landlord will continue to lease out roughly 15% of the high-rise to some of the building's existing tenants, which include engineering firm HDR, environmental consulting firm SWCA and accounting firm CLA, according to CoStar data. It isn't yet clear which tenants will remain at the property.
'Significant presence'
U-Haul employs about 1,600 people at its current headquarters, a nearly 109,100-square-foot property it fully occupies and has owned for the past several decades.
The company is "evaluating numerous possibilities with our existing campus footprint [and] we think carefully before selling any assets and prefer a strategy of reuse when possible," U-Haul Vice President Sebastien Reyes said after the company closed on its new Midtown property. Whatever it decides, U-Haul plans "to maintain a significant presence in Midtown going forward."
The moving giant's acquisition is a positive step for the tower after it hit a turbulent patch in recent years.
The lease for the building's soon-to-be-former namesake CenturyLink expired earlier this year, pushing the property's vacancy to about 85%. The telecommunications company "no longer utilized the building" and stopped paying rent after the onset of the pandemic, Wichterman said. That meant LBA Realty, the property's Irvine, California-based landlord at the time, wasn't able to generate enough rent to cover the debt service on its loan.
LBA Realty paid $77 million to acquire the tower in early 2006 when CenturyLink was still an anchor tenant. However, mounting turmoil meant a Bank of America affiliate foreclosed on the property in June, prompting the lender and new owner to quickly put it up for sale.
Despite the high vacancy rate, the listing attracted more than 180 confidentiality agreements from interested buyers, according to Cushman & Wakefield. The building ultimately landed 13 offers, and after three rounds of bidding, U-Haul managed to seal the deal.
The tower will add to the company's already vast real estate footprint, which spans 23,000 locations across the U.S. and Canada. It has rental sites in every state and province, according to U-Haul, and provides more than 1 million rentable self-storage units at about 2,335 owned and operated stores.
For the record
Cushman & Wakefield's Eric Wichterman, Chris Toci and Mike Coover represented Bank of America in the sale. Kidder Mathews' Ryan Eustice brokered the deal on behalf of U-Haul Holdings.