Austin-based Hill Partners Management Co. advised the seller, a partnership headed by Joel Peterson of Salt Lake City. "The partnership decided that it was a good time to sell," says BethAnn Signor, president of Hill Partners who served as the portfolio's asset manager since it was purchased two years ago.
The portfolio, which is about 80% service center space with 40% to 50% office finish, had a list price of $73 million. However, industry experts say the portfolio traded for considerably less than the list price. The CB Richard Ellis Inc. investment sales team ofRandy Baird, Jack Fraker, Barbara Emmons, Michael Palmer and Gray Gilbert marketed the portfolio.
In the past three years, Sealy, which has been in the local market off and on since 1973, has purchased 2.4 million sf of industrial space in Houston, including the recent acquisition, says Greg Heck of Industrial Advisors who represented Sealy in the transaction. He tells GlobeSt.com that Sealy assumed a $12-million loan to acquire the portfolio and obtained $38 million in additional financing from Chicago-based Cohen Capital LLC.
Heck says the Hill Partners' portfolio was a nice fit with Sealy's investment criteria. "We like second generation space that is not fully leased so we can create value through leasing."
According to Baird, the portfolio received 10 offers before Sealy placed a contract. "Sealy was able to see the opportunities in the portfolio," he says. "They will be able to get in there and work the portfolio. It provides some stabilized assets for good solid returns and some value-added components."
Signor estimates that 80% of the portfolio is concentrated in Northwest Houston along Beltway 8 while the remaining portion is sprinkled throughout north and northeast submarkets. There are seven buildings in Westport Business Park at Interstate 10 andLoop 610; seven buildings in Westchase Business Park; six buildings in Town & Country Business Park; and one building in Pine Forest Business Park.
"We've owned buildings in every submarket that the new buildings are in," Heck says. "We understand the markets and how they work."
The structures, built in the early 1980s, range from 35,000 sf to more than 100,000 sf, Heck says, adding Sealy was attracted to the portfolio because of diversity. "It offers a broad spectrum of product type and location," he says. "And, there is a variety of product types in one location, meaning that we can move tenants around as they grow." Rental rates range from $3 per sf for industrial space to $12 per sf for the flex space with office finish-out.
The portfolio is 75% occupied and houses 115 tenants, Baird says. Previously it was leased managed by locally based Insite Realty Partners LP. However, Sealy is re-establishing an office in Houston to handle leasing and property management for the portfolio as well as the rest of its local assets. Heck says former First Industrial Realty Trust veteran Wade Haughton will head up the office.
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