TEMPE, AZ-An affiliate of KBS Realty Advisors of Newport Beach, CA, has acquired the 439,070-square-foot Fountainhead Office Plaza for $137 million in the first major office deal over $300 per square foot since the first quarter of 2008 in the Phoenix market, according to CB Richard Ellis. Kevin Shannon, CBRE vice chairman in the company's South Bay office in Torrance, CA, tells GlobeSt.com that the pricing reflects the quality of the asset as well as capital's appetite for yield in today's investment environment.
"This is a core real estate deal, a brand new building with a strong credit tenant and a reliable income stream. It's what capital is looking for," said Shannon, who led a CBRE team that represented the seller, San Antonio, TX-based USAA Real Estate Co.
The property is a newly developed office campus at 1601 and 1625 Fountainhead Parkway in Tempe comprising two high-rise class A office buildings that were developed by USAA Real Estate along with Metro Commerical Properties.
The campus includes one 10-story building totaling 273,780 square feet, one six-story building totaling 165,290 square feet and a six-story parking structure. Both buildings are 100% leased to the University of Phoenix, the nation’s largest regionally accredited private university, through 2023.
Shannon tells GlobeSt.com that in today's investment environment, real estate's combination of yield and reliability is appealing to investors when compared with other alternatives such as money market accounts, fixed-income investments and other choices. "Capital is starved for yield," he says.
Commenting on Fountainhead, Shannon says it "represents what is especially attractive to capital today. It has a long term credit income stream at initial cap rates of 500 basis points above the current corresponding term Treasury rates.” Bidders for the office campus were mainly domestic but also included some foreign capital.
In addition to Shannon, the CBRE team included Michael Moore in the firm’s Torrance office, along with Bob Young, Steve Brabant, Glenn Smigiel and Rick Abraham of the Phoenix office and Jack Fraker in Dallas.
“Investment activity is increasing in the Phoenix marketplace,” said Young. “Fountainhead Office Plaza is one of two transactions of more than $100 million to occur in the area in the past three weeks.”
As reported recently by GlobeSt.com, the other $100-million-plus deal to trade in the Phoenix market recently was Cole Real Estate Investment's acquisition of PetSmart Inc.’s 356,000-square-foot headquarters for $102.5 million. In that deal, seller Prudential Real Estate Investors was represented by a CBRE team including Shannon, Todd Tydlaska and Ken White of the firm's Torrance office, as well as Barry Gabel and Mindy Korth of its Phoenix office.
In the Fountainhead campus sale, Shannon notes that interest rates declined during the due diligence period, working out in favor of the buyer. KBS paid all cash, he explains, and now will likely be able to place financing on the property at rates lower than those that were in effect at the beginning of the due diligence period. Rates are especially attractive for quality sponsors like KBS, he points out.
Fountainhead Office Plaza is in the master-planned Fountainhead Corporate Park. Both buildings were designed to achieve LEED Core and Shell Gold-level, with the final certification pending.
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.
