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Sublease could be money-making deal for WorldCom.

With major tenant moving, what’s next for SkyTel Centre

JACKSON — Since WorldCom opted to leave downtown Jackson several years ago and construct its global headquarters in Clinton, there’s been much debate about what would become of the mega-telecommunications company’s former home.

Sell it? Sublease it? Keep it?

WorldCom’s 10-year lease with the SkyTel Centre doesn’t end until 2005, and the company just received a rental increase for an undisclosed sum, but insiders say it’s closer to the asking price of $18 per square foot than many might imagine. But other than the basic facts, the principals involved are tight-lipped about the deal.

“Public information will show that, this past month, we implemented a CPI (consumer price index) increase that was negotiated earlier in the lease after the fifth year, which brought SkyTel’s lease rate much closer to market,” said Jay Buckley, manager of SkyTel Centre.

The contract has the typical sublease language and any renovations made to accommodate a sublease would require management approval and must be paid by SkyTel.

“Technically, it’s their property until 2005,” Buckley said.

WorldCom recently announced that several hundred SkyTel employees — rumors ran the numbers to 1,200 — would be moved from the SkyTel Centre at South Lamar Street to the WorldCom building on Amite Street in Jackson’s central business district.

Claire Hassett, WorldCom spokesperson, said approximately 550 people would be moved from the leased space to its own building, beginning in mid-August and throughout the fall.

The Amite Street location isn’t being renovated, only reconfigured to accommodate workers. WorldCom intends to sublease the SkyTel building, she added.

The SkyTel Centre, a gleaming tinted glass twin tower office building — the north tower has 10 floors and the south tower has 12 — was originally constructed in 1953. Major renovations of the 261,215-square-foot facility, currently 98% leased, were made in 1987. Parkway Properties added it to their portfolio in 1995.

Several businesses, including law firms Phelps Dunbar and Ott & Purdy, and a popular downtown eatery, Centre Deli, make their home at the SkyTel Centre. Bob Ridgway of Ridgway Realty in Jackson, said the move could be a moneymaking deal for WorldCom.

“SkyTel will be looking for someone willing to come into their space in the old building they just left at a rate higher than they were paying,” Ridgway said.

“If the market is $16 to $18 a foot, and SkyTel is paying $13, for example, and they move into their new building and get market rate under their existing lease, they make the spread. If you’ve got 1,000 square feet and you’re making $3 to $5 a foot, that’s OK. But if you’re paying $13 and can’t find anyone to rent it … the good thing is that they can afford the risk,” he said.

The move may skew the numbers of absorption rates for office space, said Gary Black, market analyst of Parkway Properties.

“SkyTel will be moving some of its employees to the WorldCom building downtown, which is, of course, owned by WorldCom,” said Black.

“It makes for some weird numbers when you’re looking at absorption rates. It’s hard to compare single-tenant buildings not available to the public because it may appear 100% leased all the time even though only 50% of the building may be used.

“A move like that decreases the occupancy in one building but doesn’t increase the occupancy of the WorldCom-owned building because it’s already assumed to be 100% leased. As far as the numbers go, they’re being absorbed out of the SkyTel Centre, but they’re not being absorbed into the old WorldCom building.”

Ridgway said the move is good for the market.

“A lot of times, people want to come into Jackson and have good space available,” he said. “This will free up good space.”

Contact MBJ contributing writer Lynne Wilbanks Jeter at lynne@thewritingdesk.com or (601) 853-3967.

About Lynne W. Jeter

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