
DURING THE QUARTER, MEPT EXECUTED A FORWARD COMMITMENT OF $120 MILLION TO
PURCHASE, UPON COMPLETION IN 2011, ONE FRANKLIN-LE MERIDIEN, a planned 250-room,
four-star hotel property in Boston. The hotel will be part of a 1.4 million
square foot, mixed-use development that will incorporate the former historic
Filenes Basement clothing store into space for retail, hotel, residential, and
office. The hotel will be built to LEEDSilver standards. The project will provide
important economic activity in Boston—the hotel construction is expected to
create over 1.1 million job hours for members of the Building Trades. MEPT believes
the investment in One Franklin will diversify the portfolio and provide an attractive
return on investment since Boston hotel market fundamentals are some of the
strongest in the country and barriers to entry are expected to remain very high.
IN SEPTEMBER, MEPT PURCHASED AN ADDITIONAL OWNERSHIP INTEREST IN ARBORETUM
LAKES WEST FOR $1.7 MILLION. The purchase of the outstanding 5 percent interest
brings the total MEPT ownership to 100 percent. Arboretum Lakes West is a Class
A, 190,361 square foot, mid-rise suburban office building located in Chicago.
MEPT currently has 29 other assets in which a minority partner holds a portion
of the ownership. It is the Fund’s intention over the long-term to purchase
these minority interests in order to maximize flexibility and enable the Fund
to fully benefit from the value created by these assets.
AT THE END OF THE THIRD QUARTER, MEPT SOLD TWO ASSETS, RED HILL AND MAGNOLIA,
AND COMPLETED A PARTIAL SALE OF ONE ASSET, STAFFORD/NELSON, FOR TOTAL GROSS
PROCEEDS OF $21.3 MILLION. Red Hill, a 57,962 square foot industrial building
in Los Angeles, was purchased by SEBCO, a Seattle-based REIT. Magnolia, a 40,164
square foot industrial asset in Phoenix, was purchased by a tenant, Midwest
Medical Supply. These properties were sold after MEPT made improvements and
fully leased the buildings, which allowed MEPT to maximize the value of the
assets. Also in Los Angeles, MEPT sold the 50 percent leased A and B buildings
at Stafford/Nelson to a local owner/user when it was determined that long-term
leasing risk in a market with competitive, newer space was greater than the
potential upside performance for these buildings.
IN APRIL, MEPT COMMITTED $27.8 MILLION TO BURLINGTON 100, a Class A
office building development in suburban Boston. The site is located in the Burlington
Centre Office Park, a current MEPT asset, and near a regional mall, restaurants,
and other tenant amenities. MEPT will seek LEED Silver certification for the
three-story, 106,887 square foot building. Construction on the asset is set
to begin in the third quarter after demolition of an existing structure on the
site, and completion is scheduled for mid 2009.
DURING THE SECOND QUARTER, MEPT COMMITTED TO PURCHASE THE ARDEA FOR $145.3
MILLION. Ardea, a former condominium project in the final stages of development
in Portland, OR, was negatively impacted by the for-sale housing downturn. MEPT
was able to acquire the project at a discount to replacement cost and plans
to reposition the property as a LEED Gold certified rental project. The development,
a transit-oriented site with proximity to Portland’s MAX light-rail network,
will have lower-floor units available for rent in August, with the remainder
of the building ready for occupancy in December 2008. It will be comprised of
two towers with 323 units, 15,947 square feet of retail and 396 underground
parking spaces.
AT THE END OF THE SECOND QUARTER, MEPT COMMITTED TO A $165 MILLION MEZZANINE
DEBT INVESTMENT to finance the redevelopment of 200 Fifth Avenue in New
York City. The former International Toy Center, in the Madison Square Park/Flatiron
district, is being redeveloped into a state-of-the-art, multi-tenant, LEEDCertified,
Class A office building with ground level retail space. The 14-story building
is 40 percent pre-leased and will have 762,221 square feet of office, 55,476
square feet of retail, and additional storage space. As a lender in this project,
MEPT will retain certain rights to the repayment of capital at the end of the
threeyear loan, and expects to earn an attractive return on investment. In the
unlikely event of default, MEPT would have rights to foreclose on interests
in the property ownership.
IN JANUARY, MEPT ACQUIRED RENO INDUSTRIAL CENTER LAND
FOR $10.3 MILLION in Reno, Nevada. The 104 acres of developable land is located
in the Tahoe Reno Industrial Center (TRIC), where MEPT acquired USA Parkway
Distribution Center I and II in December 2007. MEPT purchased the land to serve
as expansion space for tenants at USA Parkway Distribution Center and the site can
accommodate almost two million square feet. The first phase of new construction is
scheduled to begin in approximately 18 months, dependent on market conditions,
with the construction of a 806,520 square foot distribution facility that will pursue
LEED certification. MEPT believes this acquisition is a way to leverage the Fund’s other
assets in the TRIC, an attractive distribution hub for companies trying to capitalize on
the region’s low cost of doing business, favorable tax environment, and ready access to
the Western United States.
MEPT ACQUIRED 20 NORTH CLARK STREET FOR $58.9
MILLION IN FEBRUARY. The 383,030 square foot office building
is located in Chicago’s Central Loop submarket with easy access to
multiple public transportation alternatives, including the elevated train,
suburban and commuter rail lines, and numerous bus lines. The Chicago
CBD remains one of the best-performing office markets in the country,
with occupancy rates increasing by 2.7 percent in 2007 and rental rates
increasing by 4.2 percent. Market fundamentals in the Central Loop
submarket are strong as well. 20 North Clark Street, a 64-story building
built in 1981, is 93 percent leased to 64 tenants. Upon closing the sale, MEPT began
evaluating the building to position it to achieve LEED-EB (Leadership in Energy and
Environmental Design for Existing Buildings), a national rating system for building
owners to measure operations, improvements and maintenance, with the goal of
maximizing operational efficiency while minimizing environmental impacts.
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