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 Barneyĵs, 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.