February 29, 2008

Intercontinental Acquires Atlanta Area Office for $103M


By: Gail Kalinoski, Contributing Editor

Intercontinental Real Estate Corp. has acquired Lakeside Commons, a 514,000-square-foot, Class A office complex in Atlanta’s Central Perimeter submarket, for $102.8 million. It is at least the third office acquisition made through Intercontinental’s U.S. Real Estate Investment Fund, L.L.C., in recent weeks.

The name of the seller was not disclosed today.

The two-building complex (pictured) and structured parking facility at 980-990 Hammond Drive is located on 10 acres just east of Georgia 400 and north of Interstate-285. The campus has a café, sundry shop, health club, dry cleaner and car detailer on site. It is about 97 percent leased to tenants such as Porsche Cars North America, which has its North American headquarters there; Argosy University, a professional psychology institution; and Brown & Caldwell, a national engineering firm.

“Lakeside Commons is one of the most competitive and distinct office properties in Atlanta’s Central Perimeter submarket. It will be a great addition to our US REIF portfolio,” Thomas Taranto, director of acquisitions, asset and portfolio management at Intercontinental, said in a release today.

“Most of the tenants are locked in for long-term leases. But there is some roll that allows us to take advantage of market conditions,” Paul Nasser, Intercontinental chief financial officer and chief operating officer, told CPN today. “What we liked about the property is the proximity to the highway. There is going to be a new off ramp that will abut our property and give us immediate, direct access to the highway.” An added benefit, he noted, will be visibility from the highway once trees are cut down for the road construction.

A recent Jones Lang LaSalle Inc. research report on the Atlanta market noted that vacancy rates in the Central Perimeter submarket had risen slightly between October and December of last year and had a negative 210,000 square feet in absorption. But the report, featured in a Jan. 17 CPN story, noted that the other three quarters of 2007 were strong and overall net absorption was expected to the be the second highest of all the Atlanta submarkets at a positive 554,000 square feet. Jones Lang LaSalle reported that rental rates were rising with the downtown and suburban markets together averaging $21.20 per square foot in the fourth quarter, up almost 4 percent from the third quarter.

The U.S. REIF is Intercontinental’s newest private equity real estate fund. It is an open-ended commingled investment vehicle that focuses on yield-driven assets of all property types including office, mixed-use and retail. Lakeside Commons is the 14th acquisition for the fund. U.S. REIF’s most recent acquisitions have been office properties, but it also includes shopping centers and Westport Plaza in Maryland Heights, Mo., a mixed-used complex with office buildings, dining and retail and two hotels.

Nasser said the firm has a target raise of $1 billion for the fund, which currently has about $300 million of capital raised. He said the goal is to make about $600 million in purchases a year. “The good news about the fund is we can buy any property type,” Nasser said. “We obviously have the four main food groups, but we can also go outside the box.” Some options could be making hospitality and self-storage purchases. He also said the fund, which was established in January 2007, would be able to acquire operating companies and bank notes and be a lender on a selected basis. It will eventually be used to pay for ground-up development as well, he added.

On Feb. 8, CPN reported that the Intercontinental U.S. REIF had acquired Locke Drive Technology Park in Marlborough, Mass. The office/flex portfolio has three buildings on 27 acres and is about 90 percent leased. The fund also purchased Northpoint Centre in Austin a week earlier, according to a Jan. 29 CPN story. That complex has two Class A office buildings with a total of 151,000 square feet.

By: Gail Kalinoski, Contributing Editor

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