By Ken Alltucker
The Cincinnati Enquirer

The Atrium One building will be the new headquarters for Convergys Corp. (Jeff Swinger photo)

Armed with a hefty package of city and state incentives, Convergys Corp. has spent $63.8 million to buy the Atrium One office tower in downtown Cincinnati and establish a new worldwide headquarters.

The purchase clears the way for the customer-billing firm to collect $10 million from the city of Cincinnati this year as the first step of a City Council-approved $52.2 million package of grants and tax incentives over 15 years. The state of Ohio, too, is offering a tax-break deal worth $144.2 million.

Company officials say construction crews will soon begin renovating the 20-story building at 201 E. Fourth St., and Convergys workers at other locations will begin gradually moving there next year. The tax break deals require the company to invest $100 million-plus to buy and renovate an office building that will hold at least 1,450 - a work force that could double over 15 years.

Commercial real estate brokers say the deal has the potential to dramatically affect downtown real estate on two fronts.

The purchase of a modern downtown office building is a rare occurrence. Only two buildings - Chiquita Center and PNC Center - have sold since 1999. But Convergys' move to Atrium One also could force out existing Atrium One tenants - and prompt more companies to seek concessions from the city.

Chief among the city's concerns is whether Cincinnati Bell, the onetime parent company of Convergys with 750 employees at Atrium One, will seek city money to relocate to another downtown building.

A Convergys spokeswoman said the company would not ask any companies to move immediately.

"We intend to honor all of the current lease agreements with existing tenants of Atrium One," Renea Morris said.

Cincinnati Bell's lease at Atrium One doesn't expire until 2010. A Bell spokeswoman said the company is in negotiations with Convergys.

Asset Ohio Fourth Street LLC, a wholly owned subsidiary of Convergys, bought the building Oct. 8 from an Oregon-based investment firm, Property Ohio OBJLW One. The company immediately asked the city to reimburse it $10 million for the purchase.

Under the city approved-deal, Convergys also was required to obtain state tax incentives and ensure a property rights lawsuit brought by the building's former owner against the city was dismissed. Both have been accomplished, according to the company.

Bill Schneller, a CB Richard Ellis broker, said some other financial incentives might have been involved in the purchase. He noted that the Atrium One building, one of downtown's premier office properties, could be "worth more on the outside market" than $63.4 million.

Convergys declined to talk about specific details on the purchase. The building's former owner received $37.3 million in cash from the sale. Another $25.5 million from the sale was used to pay off a first mortgage held by MetLife.

Investors typically judge the value of such properties by size, location and rent terms paid by existing tenants. The 572,000-square-foot Atrium One fetched a price of about $112 a square foot.

By comparison, the PNC Center on Fifth Street sold for $52.3 million a year ago - or about $105 a square foot.

The Chiquita Center sold for $72 million in 1999 - or $133 a square foot - the most expensive downtown office deal in recent years, according to CoStar, a commercial real estate database.

Steve Timmel, an investment specialist for Grubb & Ellis West Shell Commercial, noted that buying an existing building is far cheaper than building a new downtown tower - an option Convergys once considered.

Buying land, providing parking and building a new tower downtown could cost as much as $240 to $270 a square foot, Timmel said.

E-mail kalltucker@enquirer.com