JV’s $52M Scores Office Portfolio Win

By Lee Simmons

PHOENIX-Crown West Realty LLC and St. Paul Properties have purchased 11 buildings in the Arizona Business Park for $52 million. The deal adds 440,000 sf of fully occupied office and flex-office space to the new joint venture’s portfolio.

“The opportunity in this deal was the ability to buy the buildings at their current rents and know that we’re going to end up with good leasing opportunities in two of the nicest buildings in this area in a short period of time,” Richard Rollnick, president of the Spokane, WA-based Crown West Realty, tells GlobeSt.com.

The 50-50 joint venture acquired the buildings from Estes Samuelson LLC of Phoenix, which developed them between 1987 and 2000. Compass Bank of Birmingham, AL, provided $17 million in acquisition funds at a Libor-based rate and the balance funded through both partners’ equity contributions, according to Rollnick. In addition, two loan assumptions were required before the deal could close–expanding escrow to 11 months.

“You had multiple loans with different lenders. There were some prepayment considerations and then you had a couple of tenants that were in process,” says Chris Toci, a director at Cushman & Wakefield of Arizona Inc.’s Phoenix office. A 45-day marketing period generated 17 offers on the 11-building portfolio. There were five finalists on the short list. Toci says Crown West’s market credibility and joint equity with St. Paul Properties of St. Paul helped the partners rise to the top.

The 38-acre acquisition, with a central address of 15810 N. 28th Ave., encompasses about half of the Arizona Business Park. The portfolio consists of a 49,920-sf structure occupied by NCS Pearson Inc.; a 24,985-sf building leased to Wells Fargo; a 23,772-sf building held by Hypercom Corp.; a 106,397-sf building filled by Bank One; a 66,693-sf building rented to Triwest Healthcare; and a 46,817-sf building holding Choice Education, a charter school. A separate four-building complex has Triwest Healthcare in two buildings with 43,868 sf and Wells Fargo in the other two, which total 75,263 sf.

Rollnick says rents average $1 per sf, but he predicts the rate will rise as tenants’ leases expire in the next few years. The leases in place have expirations from 2006 through 2014. He confides Bank One intends to terminate its lease in 2007 and Triwest Healthcare plans to vacate its buildings for Wells Fargo’s in 2006 when the bank moves to Deer Valley.

“We are what you would call opportunistic value-added investors,” Rollnick says. “We see an opportunity to have a class A building at a good value and be able within the next three years to find a new tenant for the building and lease it. We will do that for the Triwest building as well. This is a little bit like a maze. We’re moving a whole bunch of buildings around.”

The latest deal brings Crown West Realty’s Phoenix office portfolio to about one million sf, making it one of the metro’s largest office players since came to town 2.5 years ago. The investor’s total three-state portfolio tallies some 7.5 million sf, including industrial and office properties in Phoenix, Washington state and North Carolina.

The C&W team of Toci, Brian Ackerman, Mike Beall, Tim Whitermore and Bob Lundstedt (now with Colliers International’s Phoenix office) negotiated for the seller. Crown West and St. Paul Properties were self represented in the deal.