Featured Property
Dallas, Texas
The up-leg of a 1031 exchange, this 47,000 square foot office building was part of a two building portfolio acquired in June 2007. The buyer was left free to allocate prices and allocated 24% of the portfolio purchase to this asset (37% of total square footage). A high leverage assumable loan was placed on the larger asset, thus likely facilitating full exit price. We have a low leverage, pre-payable loan on this asset. The property is currently under contract for 52% more than our allocated price; a profit of $1,400,000 over an 18 month hold.
Westway Business Park
Arlington, TX
Net Rentable Area: 354,000 SF
Purchase Date: July 2005
Sale Date: April 2007
Purchase Price: $27,875,000
Equity: $6,370,000
Sale Price: $33,600,000
Total Distributions: $11,864,000
Profit: $5,494,000
Overall Return: 86%
Months Held: 20
Annualized Return: 51%
Description:
Westway is an 8 building multi-tenant flex portfolio. It is a combination of 5 late 80's era flex buildings, 1 two story Class B office buildings, and 2 new Class A flex buildings; a total of 353,870 square feet. At the time of purchase, one flex building was substantially vacant, and the other was completely vacant and had been for 5 years.
Strategy:
The seller was an institution who had lost momentum and was unwilling to be creative to fill vacancies. The leasing agents indicated the seller turned down several potential leases as they did not exactly fit their budget or rental expectations. A 10 year conduit note was placed at a very low fixed rate (5.05%) to close the transaction.
Result:
Within 9 months, we had leased the bulk of the vacancy, actually attracting a 100% office user into the vacant flex building by offering a rental rate far below the office buildings the tenant was considering. Although the tenant improvement costs were substantially higher than budget, so was the rental rate, creating significant value. Additionally, a sharp rise in interest rates meant our fixed financing was materially less than the rates at the time of sale. The project was sold in a package with Valwood.