By JAMES FINK
jfink@bizjournals.com | 716-541-1611

Duke Realty Corp., owner of the BlueCross BlueShield of Western New York headquarters, wants to sell the massive downtown Buffalo building.

Duke is pitching it to a select group of real estate investment trusts, private-equity firms, foreign capital interests and private-sector investors. The sale could fetch more than $80 million, making it one of the largest deals of the year.

Duke has retained the international firm of Jones Lang LaSalle to handle the sale. An offering concerning the building is just hitting key real estate and investment circles.

The transaction is expected to have no impact on BlueCross operations. The HMO employs more than 1,300 people in the three-year-old, nearly 470,000-square-foot West Genesee Street building. Its lease expires in 2024 and comes with renewal periods that could extend it several years.

"This is purely a real estate transaction," said Karen Merkel-Liberatore, BlueCross BlueShield director of public relations. "It is really just a title change. There's nothing unusual about it."

Jeff LiPuma, managing partner, CB Richard Ellis Buffalo, said Duke's decision to sell the building was anticipated. He helped broker the original Duke/BlueCross deal and his firm manages the building.

"Around Buffalo, people are used to developers building buildings and then holding on to them, but that's not what Duke does," LiPuma said. "This is strictly an investment play. Duke was up-front about their intentions from the beginning. This is certainly not a forced sale for them."

Indianapolis-based Duke invested $116 million to develop and construct the building. It built the headquarters with the intention of selling the property. The nine-acre complex features the main building and an adjoining 1,700-car, six-story parking garage.

Several factors make the deal attractive, including:

• BlueCross' long-term lease, which translates into a guaranteed, predictable cash flow for an investor or investment group.

• The stability of BlueCross. "We're not for sale," Merkel-Liberatore said. "We're not going anywhere. We've got more than 1,300 people working in here. We are not moving."

• The building's age. Less than three years old, it has LEED status and is considered state-of-the-art. The parking lot is also a major asset.

• Duke's game plan of selling the building.

"It was always our intention of eventually divesting ourselves of the building," said Whit Annibali, Duke Realty vice president of dispositions.

His company is undergoing a "very targeted process" when it comes to selling the building, he said.

Targeted groups include REITs, private-equity groups, private-sector investors and foreign capital interests.

"The foreign market is very comfortable with the U.S.," said James Fetgatter, CEO of the Association of Foreign Investors in Real Estate.

Annibali said Duke felt there are enough indicators nationally and locally that gave the company confidence to put the BlueCross building on the market this summer.

"We felt the economy has turned," he said. "A building like this with a tenant like BlueCross is very attractive in today's market, The time is right to investigate a possible sale."

In recent years, Buffalo has seen several buildings go on the market with mixed results. In May, Jones Lang LaSalle conducted an online auction of Olympic Towers. The highest bid of $2.9 million failed to make the reserve sought by the building's owner.

Last summer, Statler Towers was auctioned off in a U.S. Bankruptcy Court-ordered sale. The 18-story Niagara Square landmark sold for $1.3 million, but the deal fell apart months later.

Conversely, New Jersey-based CoFinance Inc. paid $42 million last month for a selection of local shopping centers.

"Not every building that sells in Buffalo is a poor reflection of the market," Merkel-Liberatore said.