Carter’s inks huge Buckhead lease

Douglas Sams

Commercial Real Estate Editor- Atlanta Business Chronicle

Email  | Twitter

Children’s clothing maker Carter’s Inc. reported Dec. 14 it will move its headquarters to Buckhead’s Phipps Tower.

Carter’s (NYSE: CRI) agreed to lease 222,730 square feet at the 20-story tower that rises next to luxury shopping mall Phipps Plaza. The building will house Carter’s new world headquarters. It will also contain its retail store, information technology and financial operations.

Carter’s said earlier this year it was consolidating those divisions in Shelton, Conn., with its Atlanta headquarters, bringing 200 more jobs to Atlanta. The company currently employs about 1,200 people here.

Atlanta Business Chronicle first reported Oct. 12 that Carter’s headquarters would likely move to Manulife Financial Corp.’s Phipps Tower and that the lease would mark one of Buckhead’s largest. Carter’s will relocate from another Manulife Tower, The Proscenium building at 1170 Peachtree St. in Midtown.

The deal’s gross value exceeds $100 million, but it is laden with concessions, including free rent and more than $18 million in tenant improvement allowances.

There’s a significance to that.

Buckhead’s office market is rebounding, but the incentives Carter’s received underscore that building owners will still dole out big concessions for the largest creditworthy tenants, especially for long-term deals.

The lease’s terms were detailed in a filing Carter’s made Dec. 14 with the Securities and Exchange Commission:

• It’s a 16-year agreement.
• Carter’s is receiving $83.50 per square foot in tenant improvement allowances.
• Carter’s will not have to pay rent until May 2015, at which time it will pay about $571,461 per month.
• Base rent will increase 4 percent every three years, with the first increase occurring on May 2017.
• Carter’s will pay $20 net rent to lease any space on the first through ninth floors and $21 per square foot to lease any space on the 10th through 20th floors during the first three years; $20.80 to $21.94 in years four through six; $21.63 to $22.71 years seven through nine; $22.50 to $23.62 years 10 through 12; 23.40 to $24.56 years 13 through 15; and $23.34 to $25.54 in year 16.

Douglas Sams covers Commercial Real Estate