Annapolis Commerce Park East consists of two buildings totaling 101,302 sf that are located on 7.25 acres near the intersection of Commerce Park Drive and Bestgate Road. The property is fully occupied with four tenants, including the State of Maryland, which holds about 82% of the space.
The purchase price included the assumption of a $9.2-million first mortgage at a fixed interest rate of 5.74% and a maturity date of June 2014. First Potomac paid the balance of the purchase price by issuing 72,159 units in an operating partnership valued at $24.45 per unit and approximately $8.3 million in cash.
The property is expected to generate a first-year unleveraged return of approximately 6.8% on a cash basis and 7.2% on an accrual basis.
Nicholas R. Smith, First Potomac's CIO, tells GlobeSt.com that the acquisition represents both a value add and--with the state as the main tenant--a cash flow producing opportunity for the company. "Current rents in the building are slightly below market rate. The market is tight and we think there is an opportunity to get more yield."
There are also high barriers to entry in Annapolis as there is little affordable land to build industrial/flex product. Hence the submarket's vacancy rate is less than 5%. This is one reason why First Potomac has been eyeing Annapolis for its portfolio. "It has been a market in which we have wanted to move for quite some time," Smith says.
The company did not have the opportunity until this property came onto the market--Annapolis' supply of available industrial and flex product can be quite thin, Smith notes. "We are hoping this acquisition is the beginning of further investment in Annapolis," he adds.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
