AT THE END OF THE FOURTH QUARTER, MEPT ACQUIRED A PORTFOLIO IN BOSTON FOR $230.0 MILLION.Located in the Fort Point Channel sub-market in Boston’s Seaport District, the portfolio includes three office properties totaling 226,765 square feet and two parking facilities with a total of 1,010 spaces. The portfolio also includes the potential for the development of approximately 50,000 square feet of office space. The Fort Point submarket has become particularly appealing to tech and creative tenants as it has transformed into a true "live/work/play" location with convenient access to both public transportation and major thoroughfares. These assets are expected to provide MEPT with stable cash flow and the opportunity for additional yield from rent growth, parking revenue and new development. Additionally, this acquisition is the third major transaction for MEPT in Boston and follows the Fund’s first quarter Seaport District acquisition of three office buildings and the Necco Garage. MEPT now owns 1.2 million square feet in the Boston market.
IN OCTOBER, MEPT COMMITTED $103.0 MILLION TO THE DEVELOPMENT OF A MULTI-FAMILY PROJECT IN THE PORTLAND OR MARKET. Block 137, which is located in Lake Oswego, a suburb of Portland, is planned to include 200 apartment units as well as 40,000 square feet of retail space and 430 parking spaces. Block 137 is aligned with the Fund’s investment strategy to invest in markets with urban centers with strong employers, many amenities, walkability, and a scarcity of rental options. Due to the lack of competitive existing product within the submarket, as well as the uniqueness of the location and project design, MEPT and its development partner, PHK Development, expect Block 137 to compete well with the leading apartment communities for tenants. Furthermore, Block 137 is designed to achieve LEED Gold® certification. The construction activity is expected to generate over $235 million in economic impact in the Portland area and create a significant number of "green" jobs for members of the Building Trades.
IN DECEMBER, MEPT SOLD A 49% INTEREST IN PATRIOTS PLAZA I, II AND III IN WASHINGTON, D.C. FOR TOTAL GROSS PROCEEDS OF $223.9 MILLION. MEPT formed a joint venture partnership with Ärzteversorgung Westfalen-Lippe (ÄVWL), an institution of the Medical Association of Westfalen-Lippe, one of the largest pension funds in Germany. This transaction advances MEPT’s objective to optimize the Fund’s Washington, D.C. area portfolio and redeploy sale proceeds to other accretive assets. Located south of the U.S. Capitol, Patriots Plaza is a 980,000 square foot, three-building office complex, built with post-9/11 security features. Developed by MEPT and Trammell Crow Company in three phases, the buildings have been particularly appealing to federal government tenant are more than
89% leased. Phase I has achieved LEED® Silver certification and Phases II and III have achieved LEED® Gold. At closing, Allianz Real Estate of America provided a $237 million, 10-year, fixed-rate, first mortgage loan to the joint venture.
IN NOVEMBER, MEPT RECEIVED TOTAL NET PROCEEDS OF $67.1 MILLION FOR ITS PREFERRED EQUITY INTEREST AT NEMA IN SAN FRANCISCO. NeMa is a 97.6% leased, 754-unit, multi-family property located in the Civic Center neighborhood of San Francisco, an emerging area that is experiencing an influx of technology firms, including Twitter’s headquarters. In the second quarter of 2012, MEPT entered into a $50 million preferred equity position to develop the asset. MEPT’s investment was structured to receive a 9.0% preferred return for the Fund. After less than four years, MEPT received a full repayment of its equity and earned an additional $17.1 million in interest and fees, which in total resulted in an 11.1% IRR on the investment. The development generated an estimated $725 million of economic impact in the Bay area, and created over 3.5 million job hours for members of the Building Trades in the San Francisco market.
MEPT INCREASE ITS OWNERSHIP AT THE OCTAGON IN NEW YORK WITH THE PURCHASE OF THE LEASEHOLD INTEREST FOR $28.5 MILLION. In November, MEPT acquired the development partnerâ€™s 9.6% leasehold interest in the Octagon, a 501-unit, 13-story multi-family asset, built by MEPT in 2006 on New York City’s Roosevelt Island. By consolidating ownership and buying out the developer’s interest, MEPT now fully controls the management of the 91.0% leased apartment property. In addition, and in line with MEPT’s strategic objectives, MEPT increased the Fund’s allocation to the desirable New York market as well as the multi-family sector.
MEPT RECEIVED TOTAL GROSS PROCEEDS OF $2.9 MILLION FOR THE DISPOSITION OF TWO PARTIAL LAND ASSETS IN THE MIDWEST DURING THE FOURTH QUARTER. . MEPT sold 23.5 acres of Gateway Commerce Center Land in St. Louis to Atlas of Minnesota, Inc., a subsidiary of Dart Transit Company, the 14th-largest truckload carrier in the U.S. MEPT received an unsolicited offer of $1.9 million, which was in excess of the current carry value. Also during the quarter, MEPT sold 4.5 acres of land at Kansas City Commerce Center Land located outside St. Louis for $1.0 million to Skyline Displays Heartland, Inc.
BENTALL KENNEDY JOINS SUN LIFE INVESTMENT MANAGEMENT
AND FURTHER EXPANDS NORTH AMERICAN PLATFORM. Sun Life Financial Inc. and Bentall Kennedy, MEPT’s real estate advisor, announced
on September 1, 2015 that Sun Life Financial acquired Bentall Kennedy. Bentall
Kennedy continues to be managed by its current team and retains its brand. There
are no changes to the MEPT management team. Bentall Kennedy will operate as a
unit of Sun Life Investment Management (SLIM), which provides investment services
to institutional investors and manages Sun Life Financial’s general account assets.
The two firms will combine their real estate and commercial mortgage investment
management teams to have approximately $48 billion in assets under management,
serving over 550 institutional clients and investors in these asset classes.
IN SEPTEMBER, MEPT ACQUIRED A PRIME DEVELOPMENT SITE AT
DIRIDON STATION IN SAN JOSE, CALIFORNIA FOR $73.8 MILLION,
IN JOINT VENTURE WITH TRAMMELL CROW COMPANY. This planned
multi-phased development advances MEPT’s long-term strategic plan by accessing
the urban growth opportunity in the Downtown San Jose submarket, a prime
location in innovation-focused Silicon Valley, with a high-rise transit oriented
development that will bring a significant
number of new, high-quality jobs to the
area. Diridon Station is the southern
terminus for Caltrain baby bullet and
ACE trains, a VTA light rail stop and a
planned BART station. With 10 million
square feet of active office tenants
in the market and strong demand
for apartments, MEPT’s plans for
higher-density development â€“ up to 960,000 square feet of tech-oriented, large floorplate,
high-clear height office space, over 30,000 square feet of retail and 325 multi-family
residential units – should attract tenants in Silicon Valley and transform Diridon Station
into a thriving live/work/play environment.
IN AUGUST, MEPT PURCHASED STONY CREEK PROMENADE, A RETAIL ASSET
IN CHICAGO, FOR $34.2 MILLION. The 100,000 square foot, grocery-anchored
retail center is located in the Oak Lawn trade area and was fully-leased at acquisition.
Completed in 2015, Stony Creek is the most modern and high-quality property in the
submarket and has long-term leases in place and no near-term turnover. The center’s
largest tenant is Mariano’s, a leading Chicago-area grocery store, and other key tenants
include national chains such as Starbucks, Sleepy’s and Massage Envy. The population
within this submarket has above-average net worth and disposable income, according to
the U.S. Census Bureau and ESRI, which should equate to healthy sales for the tenants
at Stony Creek Promenade. This combination of factors make Stony Creek a strong
investment opportunity for MEPT.
IN APRIL, MEPT ACQUIRED 757 THIRD AVENUE IN NEW YORK CITY
FOR $356.7 MILLION. The 504,413 square foot, Class A, 26-story office
building is located in Midtown Manhattan. The
submarket is one of the most dynamic and attractive
office investment markets, with numerous dining
and entertainment options, transit access and
compelling market fundamentals that reflect New
York’s continuing strong economic growth. With
its diverse, highly-skilled workforce, the city has
continued to attract employers in the fast-growing
technology and educational sectors as well as in
financial, creative and commercial services. This
acquisition advances several aspects of MEPT’s
strategy, including increasing investment in primary
markets and acquiring office properties in urban
locations that appeal to knowledge industries. 757 Third Avenue also adds a stabilized,
cash-flowing, long-term investment to
the portfolio. The property was renovated
between 2008 and 2011 and $21 million was
invested by the prior owner to modernize
the asset, improve energy efficiency, and
reposition 757 Third Avenue as a highquality
Class A office asset able to compete
as a value alternative to adjacent properties
on nearby Lexington, Park and Madison
Avenues. The building was 97.6 percent
leased at acquisition, with a diverse tenancy
including financial services, real estate,
technology, media and marketing firms.
IN MAY, MEPT PROVIDED A $6
MILLION LOAN FOR 160 POST
STREET IN SAN JOSE, CALIFORNIA. The fixed-rate, 8 percent land loan
facilitates the development of a planned
182-unit, 21-story multi-family project
at 160 Post Street. With MEPT’s loan
proceeds, the current land owner intends
to undertake necessary design work
and other pre-development activities to
pursue construction on or before the
loan maturity date. MEPT has the right
of first refusal on the development of
the multi-family project, or the option
to acquire the land, should the owner
decide not to move forward with the
development. The site’s location in the
city of San Jose has enticing market
characteristics that meet MEPT’s
investment criteria, including a vibrant,
walkable community located near mass
transit and a variety of dining and retail
amenities. This development would further
the Fund’s strategic goals of increasing it’s
multi-family exposure. The one-year land
loan has a projected IRR of 10 percent.
MEPT ACQUIRED THE FORT POINT CREATIVE PORTFOLIO AND NECCO GARAGE FOR A TOTAL PURCHASE PRICE OF $161.9 MILLION IN JANUARY. The portfolio is comprised of three, well-leased, mid-rise office buildings totaling 217,861 square feet in Boston’s Fort Point Channel submarket of the Seaport District. Additionally, in a separate transaction, MEPT acquired the adjacent Necco Garage, a six-level, 588 space parking facility. The Fort Point Channel area is a vibrant mix of historic warehouse buildings renovated into office, residential, and hotel uses. The submarket is transforming into a true "live/work/play" location and providing a unique alternative to the traditional office space in other Boston submarkets. The brick-and-beam style of these early Boston buildings with exposed timber beams, duct-work and brick walls provides a loft-like work space that is particularly appealing to technology and creative tenants such as software, digital media, architecture and marketing firms who desire to be in the submarket. The acquisition increases MEPT’s investment in Boston and furthers the Fund’s strategic plan to acquire office properties in urban locations in innovation-driven markets. The adjacent Necco Garage provides an ancillary benefit to the office buildings through the ability to control parking for potential tenants while it also serves office tenants in the surrounding submarkets and visitors to the nearby cultural and entertainment sites.
IN FEBRUARY, MEPT ACQUIRED MIDTOWN CROSSING, AN URBAN RETAIL CENTER IN LOS ANGELES, FOR $186.9 MILLION. The retail center is well-leased and anchored by Lowe’s Home Improvement, with a variety of other nationally recognized tenants, including Sports Authority and PetSmart. The 314,858 square foot Midtown Crossing is comprised of six, two-story buildings and sits on 11.4 acres with very good visibility in a highly-trafficked area. Situated between Downtown Los Angeles and West Los Angeles, the center benefits from its location in one of the most densely populated areas with 0.5 million people in a 3-mile radius and 1.2 million people in a 5-mile radius. Built in 2006 and renovated in 2012, Midtown Crossing is one of only two retail centers over 200,000 square feet to be built since 2000 in Los Angeles. Given the infill location and high land prices, it was a rare opportunity for MEPT to acquire this modern shopping center and furthers MEPT’s strategic goal of increasing retail exposure to in-fill locations within primary markets.
DURING THE QUARTER, MEPT COMMITTED $73.5 MILLION TO THE DEVELOPMENT OF LINCOLN CROSSING IN THE NEW YORK MARKET. MEPT acquired the 19.9 acre land parcel located in the Meadowlands submarket in Northern New Jersey with plans, contingent on achieving site entitlements, to build a 347,053 square foot Class A warehouse/distribution facility. Lincoln Crossing is easily accessible from the New Jersey Turnpike (I-95) and is only two miles from the Lincoln Tunnel, the preferred entry point into Manhattan for truck traffic. Within 10 miles of Newark Liberty International Airport and the Ports of Newark/Elizabeth, the site is a prime location for a large bulk-distribution facility. The Meadowlands submarket has strong market fundamentals and is out-performing the broader Northern New Jersey market with 11.0% availability (and just 4.4% direct vacancy). The submarket currently consists mostly of older product with very few modern buildings. This project will increase the Fund’s allocation to modern distribution facilities situated near major population centers.
IN MARCH, MEPT SOLD THE VILLAGE OF BLAINE SHOPPING CENTER IN MINNEAPOLIS FOR TOTAL GROSS PROCEEDS OF $38.3 MILLION. MEPT acquired the 221,239 square foot retail center in 2005. The "main street" style shopping center has 194,606 square feet of retail space and 26,633 square feet of second-floor office space, in addition to two out-parcels. The retail center is anchored by grocer Cub Foods and supporting tenants include Michaels and Sally’s Beauty Supply. While the asset was relatively well leased, there were concerns about competition from a new grocery store being built nearby as well as a decline in demand for the vacant retail space. As a result, MEPT marketed the asset for sale. After receiving solid interest from buyers, MEPT selected an offer from a joint venture between Pine Tree Commercial Realty, LLC and the Davis Companies.