Downtown Columbia redeveloper and principal land owner Howard Hughes Corp. has acquired six downtown office buildings from Mall in Columbia owner General Growth Properties, a move that solidifies the developer's hold on Town Center's grand mixed-use redevelopment.
The six buildings are valued at $130 million and total 700,000 square feet of Class A office space; they were acquired from Mall in Columbia owner General Growth Properties, which created Howard Hughes through a 2010 spin off during GGP's bankruptcy filings.
The exchange, announced Thursday, also includes parking decks for the six buildings, which are 90 percent leased. The buildings are:
class="li1">•10 Corporate Center: a four-story, 90,000-square-foot building valued at $16.9 million.
class="li1">•20 Corporate Center: a five-story, 110,000-square-foot building valued at $16.9 million.
class="li1">•30 Corporate Center: a 12-story, 135,000-square-foot building valued at $20.7 million.
class="li1">•40 Corporate Center: a 12-story, 150,00-square-foot building valued at $24.3 million.
class="li1">•50 Corporate Center: a seven-story, 120,000-square-foot building valued at $26.1 million.
class="li1">•60 Corporate Center: a six-story, 110,000-square-foot building valued at $25.1 million.
The exchange was part of a settlement agreement between the two over a tax dispute involving the Internal Revenue Service in which a U.S. Tax Court judge ruled Howard Hughes owed a total of $204 million in back taxes and interest fees to the IRS, according to court records.
The six buildings, along with a cash payment of $138 million, will be conveyed to Howard Hughes from GGP as indemnification for the IRS claim against Howard Hughes. The settlement involves the sale of property in Las Vegas, part of Howard Hughes' master planned Summerlin community, from 2007 and 2008 by GGP – who owned the land at that time but has since conveyed it, along with much of the land in Columbia except the mall, to Howard Hughes.
The dispute hinges on whether or not GGP's land sales, which were largely used to build private homes in the development, were subject to certain accounting principles GGP used to calculate the taxes. Judge Robert A. Wherry of U.S. Tax Court ruled in favor of the IRS, in a decision he wrote "draws a bright line."
As a result of the ruling, Howard Hughes was required to pay $144 million in taxes and $60 million in interest to the IRS, which was tendered this week.
According to SEC records released by Howard Hughes this week, GGP, under an agreement reached during the 2010 spinoff, is liable to pay indemnity to Howard Hughes equal to 93.5 percent of certain tax filings and 100 percent of interest or penalties on those filings, which included the taxes in the IRS case.
Instead of having GGP reimburse Howard Hughes for the $204 million it had to pay the IRS, the two agreed to the Columbia land acquisition and the lump sum payment of $138 million.
The agreement will absolve GGP of its obligation to pay back Howard Hughes for the taxes, according to the SEC filings.
The deal, however, will not affect Howard Hughes' ability to appeal the court decision, which the corporation did Dec. 18, according to online court records.
Following the acquisition, Howard Hughes owns 1.1 million-square-feet of office space, accounting for 50 percent of the total office space in downtown Columbia. That number includes 70 Corporate Center, which was purchased in 2012 and now houses GP Strategies and Enterprise Community Partners.
"The acquisition of the Columbia Corporate Center office buildings reinforces our long-term commitment to Downtown Columbia," said Grant Herlitz, President of The Howard Hughes Corporation.
He added: "Combined with our larger commercial portfolio and wide array of product offerings, we now have the flexibility to meet our existing tenants' space needs while also attracting new businesses and jobs to Downtown Columbia."
Howard Hughes is the developer leading the charge for the redevelopment of Columbia's Town Center, which will be converted in a true urban center for the sprawling residential Columbia.
The developer's projects include the conversion of the lakefront, Frank Gehry-designed Rouse Company building into a Whole Foods, the construction of the Metropolitan, a 380-unit, upscale apartment complex that will include ground-floor retail near the mall; two additional mixed-use apartment complexes by the mall totaling 437 apartments and the $19 million renovation of Merriweather Post Pavilion.
The developer's largest undertaking is the Crescent, a 5 million square foot mega-development that will build an urban streetscape and downtown on woodlands near Merriweather. The project could begin construction in 2016.