Agellan Commmerial REIT Announces $18.25 Million Property Acquisition

Agellan Commercial REIT (Agellan) announced that it has entered into an agreement to purchase an office property located in Texas for a total purchase price of $18.25 million, representing a going-in capitalization rate of 8.16%. The Property is a two-storey commercial office facility located in the fast growing Techway and Energy Corridor in Houston, Texas. The Property has approximately 101,000 square feet of gross leasable area. The multi-tenant building is 100% occupied by three tenants and was constructed in 2003 and is part of a larger corporate office park which has attracted many investment grade tenants. The lead tenant, National Oilwell Varco, is S&P rated A and occupies approximately 75% of the Property until 2020.

Highlights of the acquisition include:

  • The REIT is executing its growth plan by acquiring a well-located, high-quality property in a major U.S. market which is experiencing significant growth.
  • The Property was acquired at an attractive relative valuation, and is located next to several of the REITs current assets in a strategically clustered portfolio providing economies of scale in key Houston submarkets.
  • The REIT is acquiring the Property at an attractive capitalization rate of 8.16%.
  • The REIT has negotiated an interest only 5-year term mortgage of approximately $10 million that will be fixed at an interest rate of less than 3.0%.
  • The balance of the Purchase Price will be completed through a combination of cash on hand and drawing on the REIT's acquisition line.
  • The property is 100% leased and has an attractive lease maturity profile of approximately 6.5 years at contractual rates determined to be under market.
  • Approximately 83% of the Property NOI is derived from investment grade tenants.
  • The acquisition is expected to be approximately 3% accretive to the REITs Forecasted Adjusted Funds From Operations per unit.

Frank Camenzuli, Agellan's Chief Executive Officer, commented, "We are excited because the acquisition is consistent with our previously stated growth strategy of acquiring high-quality assets located in strategic clusters in growing markets at attractive relative valuations. The REIT continues to see similar investment opportunities in the targeted U.S. markets."

on May 8, 2013