EastGroup paid about $5.6 million for the land, an average of $2.02 per sf, and $5.7 million for the one-year-old structure. In the past three years, EastGroup has invested $40 million in the World Houston park, Brent Wood, EastGroup's vice president and asset manager for Houston, tells GlobeSt.com.
EastGroup bought the bulk of the available land in the park, situated between the George H. Bush Intercontinental Airport and Beltway 8. With the airport tackling a $2-billion expansion, EastGroup could hardly go wrong with the acquisitions. Plus, the buy fuels EastGroup's master plan that calls for $50 million in new developments per year, says David H. Hoster II, president and CEO.
The REIT's acquisitions have been funded by a recent apartment sale, but part of that revenue will be coming back in an anticipated 10.2% straight line rent yield and a 9.5% first-year cash yield just from World Houston 10's tenant. EastGroup tenants pay about 35 cents to 40 cents net per sf monthly, according to Wood.
With the final papers inked, EastGroup is gearing up for a ground-breaking in the next few months of the first development phase of the vacant land, which can support up to 800,000 sf. Wood says designs and site plans are being finetuned for two class-A, tiltwall buildings. The 125,000 sf of office and distribution space will be tailored to multi-tenant use. Bob Mitchamore Architects Plus of Houston is designing the project.
It most likely will take two to four years to build out the property, "depending on market conditions," says Wood. "Obviously if we get a build-to-suit or another opportunity, we can easily progress into other phases." The acreage has come divvied into seven ready-to-develop parcels that abut or neighbor EastGroup's other World Houston properties.
EastGroup, which partners with Insite Realty as the leasing agent, owns 820,000 sf in the more than 20-year-old business park. The 97%-occupied park is tailored to air freight and distribution businesses, with about 85% of EastGroup's tenants falling into the air freight category.
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