MEPT ACQUIRED 600 CALIFORNIA STREET, A 20-STORY, CLASS A, OFFICE TOWER IN SAN FRANCISCO FOR $217.7 MILLION IN NOVEMBER. The 358,591 square foot, LEED® Gold-certified building is located in the North Financial District, one of the most in-demand office sub-markets in the U.S. The building has easy access to public transit, commercial services, accommodation and entertainment. The transaction furthers MEPT’s strategy to acquire energy-efficient, urban assets in innovation markets with strong employment trends and solid demand growth. At 70.1 percent leased, MEPT has an opportunity to lease up available space in the building at current market rents, which have increased significantly in recent years. The building was built in 1990 and significantly upgraded in 2006. Upper floors offer views of the San Francisco Bay and the building’s 20 stories have gradual setbacks, abundant glass lines, an expansive lobby, column free floor plates, and three-levels of below-grade parking.
MEPT ACQUIRED A THREE BUILDING, 230,947 SQUARE FOOT PORTFOLIO ADJACENT TO THE BOSTON MEDICAL CENTER FOR $87.8 MILLION IN DECEMBER.The acquisition is comprised of two, fully-leased medical office buildings, three properties intended for redevelopment and 2.0 acres of land for potential development. The assets provide a balance of both stabilized, cash-flowing components, and value-add development opportunities which position the Fund to benefit from Boston’s economic expansion. The assets are located in the South End submarket, which continues to evolve from its industrial roots to a more residential location and to demonstrate strong occupancy levels and healthy rental rates. Furthermore, the neighborhood offers excellent access to public transportation, major thoroughfares, restaurants, entertainment, and proximity to major employment centers. Bentall Kennedy plans to vet several options for development and redevelopment.
IN OCTOBER, MEPT SOLD THE HARMAN PORTFOLIO IN LOS ANGELES FOR TOTAL GROSS PROCEEDS OF $130.1 MILLION. The portfolio consists of Harman International Business Campus, a three building, 726,876 square foot industrial asset, and Centre at HIBC, a 129,639 square foot office building. MEPT acquired the campus in 1987, and later developed the adjacent office building in 2000. While Centre at HIBC was fully leased, Harman Industrial was in need of a repositioning and renovation in order to attract new tenants. Furthermore, in keeping with MEPT’s strategy of reducing its suburban assets, MEPT decided to sell the portfolio. After marketing the two assets for less than two months, MEPT received 10 offers, with the top five offers above carrying value. MEPT selected a joint venture of DRA Advisors as the buyer.
MEPT SOLD NORTHPORT BUSINESS PARK I AND II IN THE SAN FRANCISCO AREA FOR TOTAL GROSS PROCEEDS OF $46.5 MILLION IN OCTOBER.Totaling more than 370,000 square feet of research and development space in five buildings, the assets developed by MEPT in 1991 and 1995 were over 94 percent occupied at the time of sale. MEPT decided to sell the assets due to anticipated capital expenditures and its location in a submarket vulnerable to market volatility. With high investor demand for well-leased industrial assets, MEPT was able to command a sales price higher than the carrying value. MEPT selected Crownset Properties, LLC to purchase the two assets.
DURING THE FOURTH QUARTER, MEPT RECEIVED $38.1 MILLION IN TOTAL GROSS PROCEEDS FROM THE SALE OF THE COMMERCE EXECUTIVE IV OFFICE BUILDING IN WASHINGTON, DC.In line with MEPT’s strategic objective of reducing both its suburban office portfolio, as well as moderating its exposure to the Washington, DC market, MEPT targeted the asset for sale. Located in the Commerce Executive Park, the 140,633 square foot Commerce Executive IV was developed by MEPT in 1998 and was nearly 90 percent leased at the time of sale. MEPT selected TA Associates Realty as the buyer after four competitive rounds of bidding.
AT THE END OF THE QUARTER, MEPT SOLD THE LAND AT JOURNAL SQUARE IN NEW JERSEY FOR TOTAL GROSS PROCEEDS OF $27.1 MILLION. MEPT had acquired the 2.1-acre land parcel in 2007 with the intent of developing the site. However, after holding the land for several years for the local market to recover from the downturn, the project economics still did not meet MEPT’s return requirements. As a result, MEPT marketed the site for sale and it was purchased by a New Jersey-based real estate fund.
IN JULY, PACIFIC PLACE, A RETAIL ASSET IN SEATTLE, WAS SOLD FOR A TOTAL GROSS SALE PRICE OF $271 MILLION.For its joint venture interest, MEPT received $77.4 million in net sale price. The five-story, 323,000 square foot upscale shopping center located in downtown Seattle was developed by MEPT in 1998 and generated approximately 1.8 million job hours for the Building Trades. Anchored by an AMC Movie Theatre, Barnes and Noble, and Barneys, Pacific Place was built at a time when downtown Seattle was in decline. In 2008, it was recognized by Seattle as one of the most important advances in the downtown corridor in the past 50 years. While Pacific Place has been a top performing asset for the Fund, with occupancy consistently above 90%, there was anticipated near-term rollover which could result in lower future rents. Given that "brick and mortar" retail formats will need to change to meet customer preferences and address e-commerce needs, MEPT believed the asset would require significant repositioning. As a result, MEPT marketed the asset for sale. With strong institutional demand for core assets in primary markets, MEPT was able to secure the highest price paid per square foot for an asset in Seattle of approximately $840 per square foot. Madison Marquette was the buyer.
DURING THE QUARTER, MEPT RECEIVED $66.3 MILLION IN GROSS PROCEEDS FROM THE PAYOFF OF A MEZZANINE LOAN ON THE VERMONT. In December of 2011, MEPT provided an $49.9 million mezzanine loan for the development of a $194.4 million 464-unit, multi-family project located on Wilshire Boulevard in downtown Los Angeles. During construction and initial lease up, MEPT earned 9.0 percent interest on its loan. While the initial investment period for the loan was four years, the current owner took advantage of strong demand in th market, sold the property for $283.0 million and paid off the loan to MEPT before the original term expired. As a result of the early prepayment, MEPT received nearly $10 million in prepayment penalties in addition to $6 million of accrued interest. Consequently, the total return on MEPT’s investment was 27.0 percent.
IN APRIL, MEPT COMMITTED $100.9 MILLION TO THE DEVELOPMENT OF LIVERMORE DISTRIBUTION CENTER IN THE SAN FRANCISCO MARKET. The three-building, 1.3 million square foot industrial development project is located in the Livermore submarket, approximately 25 miles southeast of the Port of Oakland. The new state-of-the-art industrial buildings will be accessible from major transportation corridors and should draw tenants seeking modern distribution facilities in the supplied-constrained Bay Area market. With its joint venture development partner, Trammell Crow Company, MEPT has planned for market-leading design features such as 32’ clear heights, cross-dock configurations, ESFR sprinkler systems, and ample truck and trailer parking. The development is consistent with MEPT’s "build-to-core" strategy, and will satisfy MEPT’s goal of increasing its allocation to modern, bulk distribution assets in primary markets. Construction is scheduled to begin in the first quarter of 2015.
IN JUNE, MEPT RECEIVED GROSS PROCEEDS OF $27.5 MILLION FOR THE SALE OF GSW GATEWAY. Located in the Dallas market, immediately south of the Dallas-Fort Worth Airport, the 423,000 square foot, two-building warehouse facility was acquired by MEPT in 2001. Although the asset was fully leased at the time of sale, it was targeted for sale due to concerns that the asset and its older features would not achieve the same rents as newer, more modern properties in the market and lease renewals would become more difficult. With strong institutional demand for core industrial assets in primary markets, MEPT was able to command pricing above carrying value for the asset. After receiving 18 offers for the asset, MEPT selected an all-cash offer from American Realty Advisors.
IN JUNE, TWO MEPT ASSETS WERE NAMED AS FINALISTS IN THE 2014 ULI GLOBAL AWARDS FOR EXCELLENCE. The 36-year old industry competition recognizes real estate projects that demonstrate high-quality innovative land use and excellence in design, construction, economics, planning and management. Via6, a 654-unit, two-tower, LEED® Gold certified apartment complex built by MEPT in Seattle, is a finalist. Also named is The Brewery Blocks, a mixed-used project in Portland, OR in which MEPT developed Brewery Blocks 2, a Class A, energy-efficient, office building built through a combination of new construction and the adaptive reuse of a historic brewery. Winners will be announced at ULI’s 2014 Fall Meeting in October.
MEPT RECEIVED TOTAL GROSS PROCEEDS OF $63.0 MILLION FOR THE SALE OF FOUR ASSETS IN SOUTHWEST COMMERCE CENTER. Southwest Commerce Center I-IV, located in Reno, with over 1 million square feet in six industrial buildings, was developed by MEPT between 1997 and 2001. Located near US 395 and the Reno/Tahoe International Airport, these assets not only offer tenants easy access, but also high clear heights, deep truck courts and parking desirable to tenants seeking a distribution hub. At 95 percent occupancy, Southwest Commerce Center I-IV was a strong performer but located in a non-strategic market for the Fund. Increased investor interest for bulk distribution properties allowed MEPT to achieve premium pricing for these four assets in an all-cash transaction with Cornerstone.
KATHLEEN KENNEDY TOWNSEND JOINS THE NEWTOWER BOARD OF DIRECTORS AS AN INDEPENDENT DIRECTOR. In March, NewTower Trust Company announced that the Honorable Kathleen Kennedy Townsend joined its Board of Directors, expanding the number of independent board members to five. “Kathleen is an exceptionally accomplished person who brings valuable, pertinent experience to our Board,” said Daniel W. Toohey, Chairman of the Board at NewTower. “In her role as Maryland’s Lieutenant Governor, she championed economic development and sustainability, which have long been key priorities for NewTower and MEPT. Furthermore, her direct experience working with and understanding the challenges of pension funds adds an important new perspective to our Board. Her appointment strengthens our ability to successfully build and expand the MEPT strategy and meet the expectations of our investors.” “It is rewarding to be joining an organization with a track record of exceptional fiduciary responsibility, and an unwavering focus on investors, performance, and prudent growth,” Ms. Townsend said. Ms. Townsend was the first woman elected Lieutenant Governor in the State of Maryland where she served from 1995 to 2003. Prior to her election as Lieutenant Governor, Ms. Townsend was Deputy Assistant Attorney General of the U.S. Ms. Townsend is a Managing Director at The Rock Creek Group, a leading global investment and advisory firm. She also serves on the Board of Directors at the Pension Rights Center.
HILLSBORO BAY CLUB MEPT SOLD HILLSBORO BAY CLUB IN THE MIAMI AREA FOR TOTAL GROSS PROCEEDS OF $56.0 MILLION. The 366-unit multi-family asset was acquired by MEPT in 2010. While MEPT had achieved a stabilized occupancy of 95 percent at the asset, new supply in the market was expected to put downward pressure on market rents and occupancy at the asset. As a result, MEPT marketed Hillsboro Bay Club for sale and, after a month on the market, MEPT received 10 offers. MEPT selected Bell Partners, Inc., a private real estate company, as the buyer.
MEPT SOLD SIX RETAIL ASSETS IN THE SOUTHEAST FOR TOTAL GROSS PROCEEDS OF $59.4 MILLION. The grocery-anchored retail centers, two of which are in Tampa, one in Orlando and three in Atlanta, were purchased by MEPT in 2011 as part of a larger portfolio transaction, and total nearly 445,000 square feet. While the assets were approximately 93 percent leased and performing well, MEPT targeted these six assets for sale since they were in secondary retail locations. MEPT received numerous competitive offers for the assets and ultimately accepted Phillips Edison & Company’s bid to purchase the assets.