KBS Portfolio, Nashville, TN
|Asset Type:||Industrial / Flex / R&D|
|Date Purchased:||June 27, 2014 / Sale Date: May 4, 2018|
|Sponsor/ GP Capital:||Albany Road Real Estate Partners|
|LP Investors:||Individual High Net Worth and Family Office Investors|
|Lender:||JP Morgan; $28,700,000; 10-year, fixed rate at 4.43%; 3 years I/O|
Property Details and History
The KBS Portfolio, (“the Portfolio”), is a stabilized, five building, Class A, flex portfolio anchored by CVS Caremark (NYSE: CVS), AdvanceMed and Amsurg Corporation. The Portfolio, located, just outside of the urban core with proximity to the CBD and Nashville International airport was acquired in June 2014 for a purchase price of $33,300,000 ($81/sf). The Portfolio was acquired from KBS Realty Advisors who divested as part of a transition in their investment thesis from yielding assets to value-add opportunities.
Cumberland Business Center (“Cumberland”), located in the MetroCenter submarket, is a one-story office building totaling 166,137 sf. Originally developed as a flex warehouse building, Cumberland was converted to an operations center for Sprint Communications with 55,000 sf of space converted to indoor parking. Cumberland is currently 100% leased with 90% of the building leased to Caremark/CVS, as a regional call center until June 2019. With an above-market 7.2:1 parking ratio, Cumberland offers an amenity (indoor parking) that does not exist within the urban core.
Riverview Business Center (“Riverview”), also located in MetroCenter, is a two-building, one-story office-flex project with 95% of the space fit out as office product. Currently, 100% leased, Riverview offers a diversified rent roll of credit tenants such as Standard Parking and Mission Point Health. Riverview is situated on approximately 17 acres with 455 parking spaces, a ratio of 4.5:1.
Royal Parkway Office Park (“Royal”), located in the Airport North submarket, is a two-building, one-story office-flex project with 70% of the space fit out as office product. Royal offers quick access to I-40 and the Nashville International Airport. Currently, 95% leased, Royal offers investors the ability to increase returns through the lease-up of a modest amount of vacancy. Tenants in Royal Parkway include the General Services Administration and Amsurg Corporation. Royal is situated on approximately 9 acres with 518 parking spaces, a ratio of 3.6:1.
Over a four-year hold period, Albany Road maintained an average occupancy of 93% (up from 87% at acquisition) and was able to renew two of the largest three tenants within the Portfolio, Amsurg Corporation, and AdvanceMed. Both aforementioned leases were marked to market representing the ability to push lease rates within the Portfolio, 15%-20%. Albany Road also completed several upgrades to the Portfolio such as: crack-sealing, overcoating and striping the parking lots, as well as upgrading the monument signage. After the completion of these value enhancements, the Portfolio was listed for sale with Cushman & Wakefield acting as the primary advisor and closed in May 2018 for a price of $41,200,000 ($100/sf).