$106.5M GSA Portfolio Includes Built-to-Suit Assets

DALLAS—Despite 42 properties involved and a speedy transaction turnaround required, a transaction team worked quickly to pull it off. In the end, Tanenbaum Equity Partners, a subsidiary of Oklahoma City-based Gardner Tanenbaum, acquired the CoreCivic National GSA Portfolio.

The portfolio consists of 42 federally leased properties located in 10 states and totals more than 573,000 square feet. The total acquisition price was $106.5 million before closing costs and construction capital reserves.

The portfolio is primarily leased by the federal government to agencies such as the Social Security Administration, Office of Hearings and Operations, Military Entrance Processing, Department of Homeland Security and the Veterans Administration. Most of the assets were built-to-suit for the government.

The states in which the properties are located are Texas, Florida, Alabama, Georgia, Tennessee, Kentucky, Arkansas, Oklahoma, North Carolina and Mississippi, GlobeSt.com learns.

“The acquisition brings TEP’s government-leased portfolio to a total of 105 properties and we are actively seeking to further grow our GSA holdings into 2021,” said Richard Tanenbaum, TEP’s founder and managing partner. “This purchase was complex in nature as the sellers needed to close by year-end 2020 to meet certain tax benefits of converting from a REIT to a corporation. We had to maneuver through an intricate CMBS defeasance for 24 of the properties, tour the buildings within a two-week period, and quickly get apprised of 17 outstanding construction projects, all at various stages in process. TEP closed this portfolio within 35 days from the date we went under contract. This was no easy feat given the multifaceted nature of the package and current market environment due to the pandemic.”

TEP was represented in the transaction by both the Ficke Team of Colliers International as investment sales representatives and Marcus & Millichap Capital Corporation as financing intermediary and advisor.

A Dallas-based Marcus & Millichap capital markets team led by Sunny Sajnani, Todd McNeill and Brandon Wilhite secured acquisition financing from Arkansas-based Centennial Bank.

“The complexity of this acquisition and the various construction projects currently ongoing and planned over the next 12 to 18 months required a lot of creativity and structuring from a financing standpoint to achieve the short- and long-term goals of TEP,” said Sunny Sajnani, senior managing director capital markets with Marcus & Millichap Capital Corporation.

The senior loan was structured as a fixed-rate bridge facility to acquire the 42-asset portfolio, plus a line of credit to provide future funding for capital improvements and tenant improvement projects. Plans include 17 improvement projects on behalf of the federal government.

“The purchase of these 42 CoreCivic assets marks the second portfolio we have sold to TEP in the last 18 months,” said Geoff Ficke, executive vice president with Colliers International. “Just last year, TEP purchased a 13-property national GSA portfolio we were marketing primarily in Michigan, Ohio and Florida. They are without a doubt one of the most active buyers of federally leased product in the country.”

Ficke says one of the most intriguing aspects of this portfolio was the concentration of assets in core and secondary markets throughout the Southeast, which continues to experience strong population migration and growing demographics.

“We believe these assets are well-positioned in TEP’s portfolio by size, location and agency,” he says. “These correlate nicely with TEP’s strategy of long-term ownership.”

And overall, GSA properties stand above many others when investors are considering assets for acquisition.

“Real estate assets that are occupied by the Government Services Administration are attractive to investors and lenders because the lease payments are backed by the full faith credit of the US government,” Sajnani tells GlobeSt.com. “Also, government agencies usually have very specific occupancy requirements and tend to stay in their location for a long period of time with a high probability of lease renewal.”