"The rents are significantly below market," says Larry Finger, senior vice president and chief financial officer for WRIT. The average rent tenants are paying in the building is $21.83, but WRIT believes the average rent demand in the area is $25.91--an 18.7% increase just in base rent alone, Finger says.
WRIT expects the investment to produce a first-year cash return of 10.5%, and replace below-market leases on 31% of the building over the next two years. The building also lies across the street from another building WRIT owns at 515 King St. "We are oftentimes able to move tenants round like that," he notes.
WRIT plans to spend about $750,000 renovating the common areas, roof, exterior, mechanical, security and safety systems. The seller was TrizecHahn of Toronto, which picked up the property earlier as part of a portfolio.
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