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HOUSTON-A private equity firm from New York City has used part of its new fund to acquire the two-building, 192,000-sf Interwood Business Center. The transaction represents KTR Capital Partners' first purchase of industrial product in the Greater Houston market, but definitely not its last.
The two-year-old KTR just closed its first pool, Keystone Industrial Fund LP, raising more than $505 million in equity commitments for a plan to amass $1.4 billion of value-add properties and develop in the US. Houston is one of the KTR fund's targeted areas for investment.
According to Don Chase, KTR's principal, the local market's fundamentals make it an attractive investment arena while the dynamics of the business center, in particular, made it a good initial acquisition. "We felt like there was some upside in terms of occupancy," Chase tells GlobeSt.com. "It's a high quality, well-built property and we liked the location adjacent to the airport." The center is situated on 10 acres at 14430-40 John F. Kennedy Blvd. and 14439-69 Heathrow Forest Parkway.
From the seller's perspective, KTR was considered an ideal buyer because its representatives were enthusiastic about the asset, which generated roughly 10 offers in a six-month market run. "They did their due diligence plus they had a track record, an ability to close and a strong price," says Rusty Tamlyn, a principal and managing director in Houston with Trammell Crow Co. AEW Capital Management LP of Boston and Midway Cos. of Houston co-developed the center in 1999. He says the JV seller, AEW/Midway Industrial LP, felt it was time to sell due to the strong capital market.
The final price isn't being disclosed. But, area sources say comparable properties are trading for $45 per sf to $55 per sf. Harris County assesses Interwood business Center at $7.5 million.
The center is 81% occupied. Chase says a soon-to-be-signed lease will push occupancy to 94%. "We felt this was a good start to a presence and a portfolio in Houston," he adds. KTR used in-house brokers to structure its terms while TCC's Ralph Tullier assisted Tamlyn in negotiating the sale.
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