In the latest sign of how lower demand is hitting parts of the U.S. office market, one of the tallest towers in St. Louis that sold for $205 million in 2006 has changed hands again this week — for about $3.6 million.
The former One AT&T Center, a 44-story high-rise totaling 1.46 million square feet at 909 Chestnut St., is now owned by Boston-based Goldman Group. The firm bought the property via CoStar Group's Ten-X auction exchange from SomeraRoad Holdings, a commercial real estate investor and developer that paid just $4.5 million for it two years ago. On a per-square-foot basis, the tower’s value over 18 years dropped from about $140 to $2.50, according to CoStar data.
The block on which the long-vacant property sits was declared a blighted area by the St. Louis Planning Commission in 2023. SomeraRoad had proposed renovating the existing building to develop 306 apartments, 300 hotel rooms and 37,000 square feet of retail, thus reducing the office square footage by 1.2 million square feet.
The company's plan to redevelop the tower never materialized. Charles Goldman, principal of Goldman Group, wouldn’t disclose to CoStar what his firm intended to do with the property, saying his company was “still digesting the sale.” At 588 feet, the former One AT&T Center is taller than all but the 630-foot Gateway Arch monument in St. Louis and the 593-foot One Metropolitan Square office building.
A redevelopment of the property could face significant challenges as office space use has changed after the pandemic accelerated the adoption of remote and hybrid work policies. Higher interest rates have also led some companies to scale back on costs for real estate and employees.
The nation’s central business districts have seen their office vacancy rate climb from a low of 8.9% in the third quarter of 2018 to 16% this past quarter, according to CoStar data. St. Louis’ current office vacancy surpasses that at nearly 18.6%. Without the empty 909 Chestnut tower, St. Louis’ vacancy would dip to about 14.3%.
AT&T Tower is the second-largest vacant office building in the United States and has been empty since 2017, CoStar data shows. The largest empty office structure in the country is the 1.59 million-square-foot 5400 Legacy Drive in Plano, Texas. Developer NexPoint paid $125 million for that property in 2018 and plans for it to be the center of a $4 billion life science campus that would include hundreds of apartments and a hotel.
The previous sale of 909 Chestnut to SomeraRoad in 2022 resulted in a nearly $123 million loss to bondholders on the commercial mortgage-backed securities market. That was the second-largest such loss on record behind only the roughly $128.6 million loss on a former CA Technologies office complex in Islandia, New York, after the lone tenant there moved out and the property owner defaulted on a $165.6 million CMBS loan in 2016, according to the CoStar data.
In 2006, AT&T sold 909 Chestnut in an 11-year sale-leaseback deal with Highlands REIT. The telecommunications giant moved workers to adjacent buildings starting in 2013, and Highlands defaulted on its CMBS loan on the property about four years later.
The building’s track record of declining value over years of high vacancy highlights how steep Goldman’s uphill road could be. The firm must overcome limited parking in downtown St. Louis, soft demand for office space and a need for a significant investment to modernize the 36-year-old property.
Over the past year, office tenants in downtown St. Louis gave back 270,000 square feet, increasing vacancy to 18.5%, according to CoStar data. That rate is higher than the long-term average of 15.2%.
Nationally, stagnating office attendance and slowing employment growth led to further occupancy losses and higher vacancy in 2023, sending the national rate to a record high of 13.8%.