Pantry buys instead of renting

Father Time has been kind to The Pantry.

The Sanford-based owner of more than 1,600 gas station-convenience stores in the Southeast paid $8.5 million for a 61,552-square-foot building at 305 Gregson Drive in Cary. The offices will house the company's new headquarters, with about 150 workers.

The deal comes more than two years after The Pantry said it would move to Cary. Back then, as easy money increased the flow of investors and jacked up property prices, The Pantry expected it would lease space.

But as cautious lenders have required more equity from investors, buyers have fallen out.

Triangle office sales totaled $409 million in 2008, down 50 percent from the previous year, according to CB Richard Ellis.

The lack of activity has cut prices, making it easier for companies to justify owning their space, rather than renting it.

Indeed, The Pantry paid a couple million dollars less than the appraised value, says Anthony Dilweg, chief executive of Durham-based seller Dilweg Cos.

The price, about $138 per square foot, was 13 percent below the average paid for Triangle office buildings in 2008, according to Real Capital Analytics, a New York-based real estate researcher.

To be sure, Dilweg wasn't hosed. "We both got a good deal," he says. Dilweg paid a mere $1.2 million for it in early 2007, and then spent about $5.5 million on renovations and other costs.

It had planned on renting the space, but office demand has slowed, and The Pantry made an appealing offer.

The sale is the culmination of a decade-long game of hot potato.

Moldy potato, to be more precise.

Merisel, a distributor of computer hardware and software in the mid-1990s, bought the former call center for $5.6 million in 1998.

The company moved out a few years later as it shrank its Triangle operations. After discovering that the building was infested with black mold, Merisel sold it to Dilweg for $3 million in 2002.

Dilweg planned to renovate and expand the building, which sits on seven acres. But a soft office market at the time killed those plans, and Merisel regained control under a buy-back agreement, paying $3 million in early 2006.

Merisel put the building back on the market. Dilweg snapped it up for $1.2 million a year later, and has been renovating it ever since.

"We turned the black mold into gold," Dilweg says.

Dilweg was to spend $7 million on renovations, but left some interior construction costs to The Pantry, which moves in this summer.

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John Kane may be squeezing more out of his North Hills empire -- with the divine help of a neighbor.

The developer, who in 2006 won approval to build a second helping of offices, shops, residences and hotel rooms east of Six Forks Road in Raleigh, has asked the city for permission to add property owned by the Church of the Apostles to the plans.

Kane resubmitted plans for a so-called Planned Development District, a specially zoned area that allows the developer and city to agree on custom zoning.

The current plan allows Kane to build as many as 1,800 homes, 1.3 million square feet of offices, 850 hotel rooms and as many as 450,000 square feet of shops on about 45 acres.

The revised plan adds seven acres, including some owned by the church, between St. Albans Drive and Interstate 440.

By adding the land, the church would get zoning flexibility on how it can expand its facilities.

Kane, meanwhile, would be able to add 13,000 square feet of offices and as many as 276 residential units on his neighboring land.

The ability to build more homes, however, doesn't mean Kane will right away.

"We just wanted the flexibility," he says. "We don't know what the demand in the future will be for the maximum number of units on that property."

At the moment, he is holding off building more homes on a nearby 40-acre tract, called Ramblewood, until the housing market recovers.