Falcon Agrees to Buy Seven Properties in First Half of 2004

Falcon Real Estate was quite active during the first half of 2004, successfully bidding on seven properties during this period. This high level of activity reflects the fact that the relative attraction of US real estate as an investment has become more widely appreciated, not only in the United States but also by investors around the world. In addition, Falcon’s expanded marketing efforts have developed relationships with a number of new clients. The properties purchased during the first half of the year included the following:

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Time-Life Building

1. Time-Life Building, Alexandria, Virginia - This is a five-story office building that has a total of 156,123 rentable square feet (14,519 square meters) that has been almost totally occupied by Time-Life. The property was purchased on an all-cash basis at a price of approximately $39 million, equal to $250 per square foot. For further details as to this purchase click here for an article in our Archives: “Falcon Purchases Time-Life Building.”

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Delta Airlines Building

2. Delta Airlines Building, Miramar, Florida – This is a 49,650 square foot office building that is 100% leased to Delta Airlines, Inc. for a period of 15 years. The lease is supported by a letter of credit. The property was purchased at a price of $10.9 million, equal to a going-in capitalization rate of 8.5%. Mortgage financing was provided by Credit Suisse First Boston.

3. FCB Building, Irvine, California – This is a 98,925 square foot flex office building that is leased to FCB Worldwide with 13 years remaining on a 15-year triple net lease. The lease is guaranteed by FCB’s parent company, the Interpublic Group of Companies. The property was purchased at a price of $29.5 million equal to a going-in capitalization rate of 8.1%. Banc of America Securities provided mortgage financing for this transaction.

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McGraw Hill Building

4. McGraw Hill Building, Salinas, California – This is a 98,127 square foot office building that is leased to McGraw Hill Corporation. The tenant has signed a 10-year net lease with 2% annual rental increases. The property was bought at a price of $18.3 million equal to a going-in capitalization rate of 7.2%. The property was purchased all-cash.

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Aventi Apartments

5. Aventi Apartments, Aventura, Florida – This is a 180 unit apartment complex in Aventura, just north of Miami. The property was purchased by a syndicate put together by Falcon Real Estate, with the intention of converting the apartments to condominium ownership during the next 18 to 24 months. The property was purchased at a price of $40 million and was financed with a first mortgage loan, a mezzanine loan and a portfolio loan from offshore investors. Falcon Real Estate provided the equity.

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Digeo Broadband Building

6. Digeo Broadband Building, Kirkland, Washington – This is a relatively new suburban office building with 50,954 square feet of net rentable area. It is 100% leased through January 2011 to Digeo Broadband, which was founded by Microsoft co-founder Paul Allen. The triple-net lease provides for annual rental increases and is secured by an irrevocable letter of credit from Bank of America. The property was purchased for $14.5 million, equal to a going-in capitalization rate of 11.3%. A $10 million mortgage was provided by Banc of America Securities.

7. Hewlett Packard Data Center, Cincinnati, Ohio – This is a 126,300 square foot office building located in downtown Cincinnati, adjacent to and connected with the Proctor & Gamble Company headquarters. Hewlett Packard uses this property to provide data processing services to P&G under a 10-year services agreement. Hewlett Packard has signed a 10-year triple net lease on the property. The purchase price for the property was $9.6 million, equal to a going-in capitalization rate of 10.24%. Mortgage financing for the property was provided by Barclays Bank.
Jack Miller, President of Falcon Real Estate, commented, “With so much of the US real estate market appearing to be overpriced, we are very pleased that our acquisitions staff has been able to find high quality properties at going-in capitalization rates in the 8% to 10% range. With the positive leverage that is available today, all of these properties will provide very attractive cash-on-cash returns to our clients. We also signed Letters of Intent for two other properties during the past six months, and contract negotiations are continuing on these transactions.”


July 2004