Falcon Purchases Two Properties in Atlanta Totaling $80 Million

For many years, Atlanta has been one of the fastest growing major cities in the United States. Since 1970, the population in the Atlanta metropolitan area has grown more than three times as fast as the overall growth rate of the United States. As a result, Atlanta, with a population of over four million people, is currently the eleventh largest metropolitan area in the country.

The rapid growth of population in Atlanta has been supported by equally rapid employment growth, and this has led to a very active real estate market in the city and its surrounding suburbs. The office market alone now totals over 150 million square feet of net rentable space, divided into four submarkets: Central Perimeter, Buckhead, Midtown and Cumberland/Galleria. Falcon Real Estate considers Atlanta to be an attractive market in which to invest in the United States and is pleased that we recently signed contracts covering the purchase of two properties in that market.

Click to Enlarge
1300 Parkwood

The first property purchased was 1300 Parkwood in the Cumberland/Galleria submarket. This nine-story multi-tenant office building was constructed in 1989 and has over 210,000 net rentable square feet of space. There is also an attached five-level parking garage with 679 parking spaces. In this case, 68% of the building is leased to GE Energy for ten years through 2014, with the lease being guaranteed by that company's parent, the General Electric Company. There are also six smaller tenants in the building, and GE Energy has certain expansion rights to additional space.

1300 Parkwood was purchased at a price of $39.3 million, equal to a going-in capitalization rate of 6.8%. Because of built-in rental increases, the average cap rate over a five-year holding period would be 7.4%. The price per square foot for 1300 Parkwood was $186. Credit Suisse First Boston also provided financing for this property, with a $27.5 million mortgage at an interest rate of 5.29%. The cash-on-cash return over a five-year holding period will average over 9%.

Click to Enlarge
Pershing Park Plaza

In addition, Falcon agreed to purchase Pershing Park Plaza in the Midtown submarket of Atlanta. Built in 1988, this is a very attractive eight-story office building with 162,303 net rentable square feet of space. Over 73% of the building has been leased to Jones, Day, Reavis and Pogue, one of the largest law firms in the United States. The lease to Jones, Day commences in October 2004 and runs for 16.5 years. There are regular rental increases provided for in the lease. The balance of the property is leased to National Service Industries, which previously occupied the entire building, through February 2006. At that time, Jones, Day has an option to expand into the space occupied by NSI.

Pershing Park Plaza was bought at a price of $41.3 million equal to a going-in capitalization rate of 7.1%. The price was also equal to $254 per square foot. Credit Suisse First Boston provided a $29.5 million mortgage at an interest rate of 5.24% resulting in a cash-on-cash return to the equity investor of an average of 8.8% over a projected five-year holding period.

Robert Moreira, a Vice President of Falcon Real Estate in the company's Miami office and responsible for acquisitions in the southeastern states, commented, "Both of these buildings are extremely attractive, Class A properties that hold prime positions in their respective submarkets. Pershing Park Plaza is one of the most architecturally significant buildings in Midtown, while 1300 Parkwood is considered to be the crown jewel of the master-planned Parkwood office development. We are very pleased to have been successful in obtaining both of these properties.


September 2004