RALEIGH — A New York real estate firm has put the old Wachovia bank building on Fayetteville Street under contract and plans to spend millions renovating the vacant property.
LRC Opportunity Fund expects to close on the 10-story building at 227 Fayetteville by the end of the year. This week the city approved an easement giving LRC exclusive use of an underground tunnel connecting the building to the Wilmington Street parking deck owned by the city.
“Our plans are to do a total renovation,” said Edward Kulik, a co-founder of LRC. “We’re doing a complete gut on the inside.”
The building’s facade will also be renovated though LRC hopes to retain some of building’s 1960s materials.
“We don’t want to lose that flavor 100 percent but we’re making that a much more modern-type building,” he said.
Kulik said the plan is to have some retail on the ground floor, where Wachovia once had a branch. He said the company is in early discussions with potential retail and office tenants.
The building, which was once the regional headquarters for Wachovia, has been on the market since a 50-year lease between Wachovia and the owners of the land expired on Jan. 31, 2011. That caused ownership of the land and the 110,000-square-foot building to revert to the families of the original owners, Morton Rosenfeld and Milton Schwartz of New York.
LRC was formed three years ago by Kulik and Howard Lavitt, two veteran real estate operators and developers. The company initially raised a $150 million investment fund from individuals and institutions, and is now finishing a second fund that will be between $400 million and $500 million, Kulik said.
LRC acquires all types of properties, and has been active in North Carolina. Among its recent acquisitions was a retail and office building in Charlotte and a 500,000-square-foot office park in Winston-Salem near Wake Forest University.
The old Wachovia building will be LRC’s second investment in the Triangle. In March, the fund paid $5.2 million for the Brier Creek Medical Pavilion, a 51,505-square-foot building that Wells Fargo had foreclosed on.
“We really like the Carolinas, we see great opportunities there,” Kulik said.
Although the old Wachovia building is in a great location in the heart of downtown, it also is in need of considerable work.
“It’s a tough building to do because it’s not a huge building and, of course, the cost is expensive,” Kulik said.
LRC expects to spend about $17 million acquiring and renovating the property. Kulik declined to disclose the purchase price, citing a nondisclosure agreement with the seller.
He said LCR typically makes acquisitions with all equity in order to move quickly. In the case of the Wachovia building, the fund is likely to only put some debt on the property once the building starts to lease up.
LRC is hoping to capitalize on the lack of high-quality office space now available downtown. The vacancy rate in downtown was just 6.34 percent in the third quarter, according to Karnes Research, a Raleigh firm that tracks commercial real estate trends.
Kulik said LRC is looking to make more acquisitions in the Triangle. While the market is showing signs of improvement, he said there remains a gap between what an owner may think their building is worth and what the market is willing to bear.
“We still have that gap to bridge a little bit,” he said. “We certainly haven’t come all the way back.”