Argus TIC Buys 225,000-SF Office Complex

NASHVILLE-Locally based Mathews Co. has sold the 225,000-sf Grassmere Plaza to San Juan Capistrano, CA-based Argus Realty Investors LP and 19 of its 1031 exchange investors. The sale price of the two-building, 24-acre office complex was $21 million or $93.33 per sf. Grassmere Corporate Plaza is located in the 100-acre Grassmere Business Park near Interstate 65 and the Harding Road Interchange. The glass and steel office complex includes a 163,086-sf, three-story atrium building and an attached, single-story call center totaling 61,844 sf. The entire complex is 100% master leased through November 2006 to Deutsche Bank, which occupies about 40,000 sf, has subleased 91,546 sf and is seeking tenants for the remaining 94,000 sf.”We have a strong credit tenant leasing the entire building and we have no financial risk for the next two years,” says Argus Realty VP Paul Gaines, who led the acquisition team. “Meantime, class A office space in Nashville is leasing up quickly.”Indeed, the Brentwood submarket had a 20% vacancy rate in office space at the end of 2002, but that rate fell to 12% to 14% at year-end 2003 and is currently in the mid-to-high single digits and shrinking. Moreover, Gaines tells GlobeSt.com that the sublease tenant, Asurion, a major provider of cell phone and wireless PDA insurance, has already committed to an eight-year direct lease that starts when its sublease expires along with DB’s master lease. Also potentially lessening the risk are the prospects of Asurion expanding by another 25,000 sf and DB not vacating the 40,000 sf it is occupying when its master lease is up. “Asurion expects to take that additional space during its tenure and Deutsche Bank has not yet said whether it plans to actually vacate the space it is occupying,” says Gaines. In addition, Gaines says the lease rates being paid by DB and Asurion are 10% to 15% below the current market rate of about $18.50 per sf.Mathews Co., a third-generation real estate services company originally developed Grassmere in a joint venture with AT&T. AT&T was to use the facility as its operations and billing center but never occupied the space. Bert Mathews, company president, says his family-owned company sold Grassmere to Argus to diversify and simplify its holdings. Gaines says Mathews will continue as leasing agent and property manager via its NAI Mathews Partners affiliate. Argus president Tim Snodgrass says the company has $150 million to invest in “quality” Nashville real estate. “Our Tenant in Common investors who toured Nashville responded immediately to this city and oversubscribed Grassmere,” says Snodgrass. “Plus, while many markets are overpriced, we feel Nashville class A properties are fairly priced and have good potential for upside appreciation.” The sale was a collaboration between Bill Tyler, a director in the Atlanta office of L J Melody & Co., and Douglass Johnson and Don Albright, both of the Nashville investment property group of CB Richard Ellis and NAI Mathews Partners. Tyler also arranged the acquisition financing, which is a $15.2-million fixed rate, six-year loan at 5.55%.