Sun Life of Canada buys N. Raleigh office buildings

Castle & Cooke sells the properties for $34.7 million

RALEIGH -- Sun Life Assurance Co. of Canada paid a California investment group $34.7 million for five North Raleigh office buildings -- the latest in this year's parade of Triangle office property sales.

The properties were a slice of a 19-building, 1.6 million-square-foot national office portfolio that Los Angeles-based Castle & Cooke has been trying to sell since July 2005.

According to Wake County deeds:

* Sun Life paid $21.9 million, or $129 per square foot, for the 170,000-square-foot Landmark Center at 4601 Six Forks Road. The property was 88 percent occupied at the end of September, up from 82 percent a year earlier, according to a Highwoods Properties market survey. The price was 5 percent above the assessed value and 32.6 percent more than the property's selling price in 1995.

* Sun Life paid $12.8 million, or $103 per square foot, for four buildings totaling about 124,350 square feet on Six Forks Road at Horizon Drive. The buildings, Horizon I-IV, sit on 12.6 acres and are an average of 15 years old. They were 83 percent full at the end of September, down from 91 percent a year earlier, according to Highwoods.

Castle & Cooke decided to sell the buildings to take advantage of rising commercial real estate prices, said Richard Toppe, president of Castle & Cooke North American Commercial in Raleigh.

Toppe said the company plans to continue pursuing investment and development deals in the Triangle. It plans to spend money from the sales on other developments, including a massive biotech center at the former Pillowtex textile mill in Kannapolis.

Phone messages seeking comment from Sun Life were not immediately returned Wednesday.

The offices are the latest additions to Sun Life's Triangle holdings. The insurance company also owns two Cary office buildings. The latest deals signal faith that the Triangle's growing economy will continue to generate demand for offices, increasing rental rates and property values.

The Triangle's office vacancy rate was 12.2 percent at the end of September, from 16.5 percent in early 2004, when the office market bottomed out after the tech bust. Quoted rental rates have since jumped 3.4 percent, to $18.94 per square foot annually, according to Karnes Research of Raleigh.

There has been at least $340 million in office sales this year, according to deeds and data from the Raleigh office of brokerage CB Richard Ellis. That eclipses the 10-year benchmark of $327 million, which was set last year.

Real estate investors are seeking properties in secondary and tertiary markets such as the Triangle as bidders drive up prices in the country's biggest office markets.

The activity is driving up prices here, too. Class-A office buildings in the Triangle were selling for an average of about $150 per square foot this time last year, up 25 percent from 2004. In the past three months, several Triangle office buildings have sold for north of $175 per square foot. One topped the $200-per-square-foot mark.