Flipping appears to be back in vogue among investors in trophy properties.
Almost a year after the Weston Business Center was acquired for $65 million, the owner is selling the property for a profit.
Acting on behalf of a German fund, RREEF, the real estate investment management business of Deutsche Bank’s asset management division, acquired the four-building complex — totaling 679,000 square feet — in May 2010. The sales was expected to close today.
CBRE broker Harry Tangalakis, who represents RREEF, confirmed the transaction but declined to disclose the value of the cash deal. The business center is expected to trade for a cap rate below 6 percent, underlying the growing demand for quality properties, real estate experts said. Tangalakis, senior vice president with CBRE, said he began marketing the business center about two months ago.
Two sources familiar with the deal said New York-based Teachers Insurance and Annuity Association – College Retirement Equities Fund, or TIAA-CREF, is the buyer. The purchase price is estimated at about $83.5 million, or about $123 per square foot. RREEF paid $95 per square foot last year.
The price hike shows how institutional investors are willing to pay big money to score a Class A acquisition in the region.
“The appreciation of the property is because of the lack of quality products available and the appetite for investors to have South Florida properties in their funds,” Tangalakis said.
The business center is “one of the finest highest quality institutional industrial properties in South Florida”, said broker Jonathan Kingsley, who is not involved in the deal but is familiar with the property. He said the quality of the buildings, the location and credit-worthiness of the tenants make the business center a desirable target. Some of its tenants include American Express, an Office Depot distribution center and Watson Pharmaceuticals.
The four buildings, which are fully occupied, are at 2915 Weston Road and 2925, 2955, and 2965 West Corporate Lakes Blvd. in Weston in western Broward County.
Atlanta-based Industrial Development International built the business center in 1998 and held onto it until last May, when it sold it to RREEF. A few months ago, RREEF executives decided to take advantage of the hot market for Class A properties, crunched the numbers and figured they could get a good return. “When they came to us, the numbers that they projected to be able to achieve seemed like an excellent return for the short period of time that they held the property,” Tangalakis said. “And the projection was spot-on.”
During its ownership, RREEF renewed two leases totaling 72,000 square feet, which likely played a role in the property appreciation.
Flipping a property in such a short period of time can be seen as a return of the boom. But the difference now is that buyers often pay cash, instead of financing most of the purchase price. The financing approach led to the collapse of the real estate and financial markets in 2008, said Kingsley, senior vice president of Jones Lang LaSalle Brokerage.
“Cash deals don’t have the burden of debt service in their returns, so it is better than putting the money in the bank,” he said.
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