RALEIGH—The Lenovo Enterprise Campus just sold for $127 million. Affiliates of Philadelphia-based Rubenstein Partners and its partner Grubb Properties sold the 485,000 square-foot corporate office campus in North Carolina's Research Triangle Park to a joint venture between United Kingdom-based 90 North Real Estate Partners and Dubai-based Arzan Wealth.

Cushman & Wakefield represented the sellers. The deal closed about 15 months after Rubenstein and Grubb's acquisition of the then-vacant property, and less than a year after the partnership signed global PC manufacturer Lenovo to a long-term lease of the entire campus.

The Lenovo Enterprise Campus is in the heart of Research Triangle Park (RTP), one of the largest research parks in the world and home to many global technology companies. RTP is a $59 billion economic engine that supports over 50,000 employees and includes 22.5 million square feet of office, flex and light industrial space.  The property has two, four-story buildings, originally developed by Ericsson.

“We've demonstrated geographic diversity with acquisitions in Raleigh, Chicago, and Denver, and we've shown the range of our financial resources with the ability to acquire assets ranging from $40 million up to and exceeding $127 million,” Daniel Cooper, partner and head of the 90 North's North American operations. "We have a great appetite for other asset classes as well—industrial, medical, and multifamily. It is just a matter of time, as we are actively looking, have a strong pipeline and significant capital to invest.”

As Cooper sees it, the Lenovo Enterprise Campus has the stability and guarantee of a Fortune 500 company and the upside potential of the additional space being developed, and available to be developed within the research park environment. The acquisition included a nearly 40,000-square-foot building, currently being built as a research and development center for Lenovo. The site can accommodate an additional 100,000 square feet of development.

"We're seeing a lot of activity in secondary markets as pricing reaches peak levels in many core markets around the country," Cooper says. "The key to finding the right asset is to stay focused on solid real estate fundamentals. We're looking for acquisitions that are backed by strong credit tenants and that have long term potential for growth. In those situations, the environment is ideal for increasing the yield on the investment." 

Of course, the campus was not always seen as a trophy.  The asset had been vacant for several years before Rubenstein and Grubb bought it in December 2013 for about $26 million. Rubenstein bet on the property because of its market analysis, which revealed a limited supply of both new construction and competing product to accommodate continued demand from major users.  

Less than four months after the acquisition, Rubenstein and Grubb secured a long-term, triple-net lease with Lenovo, which Lenovo intended to use for its new Enterprise Division created as part of a $2.3 billion acquisition of IBM's x86 server division. Lenovo's acquisition required the rapid relocation of the former IBM employees, and Rubenstein was positioned with one of the few large, high-quality available spaces at a competitive price.

“We're extremely pleased to announce this sale as the conclusion to a very successful value-added office investment,” says David Rubenstein, founder and senior managing partner of Rubenstein. “Despite the perceived risk of acquiring vacant suburban assets, there are ways be successful in this segment.  If you thoughtfully analyze the metro region, choose the right submarkets and properties, and position yourself to deliver value to tenants in the form of quality space for a compelling rental rate due to your acquisition basis, you can capture demand from major users and add tremendous value.”

Dan Doyon, director of acquisitions & regional director for North Carolina and Florida for Rubenstein, explains how the firm took a “more nuanced view” of the Raleigh submarket than some investors. That led the firm to a more optimistic view about the fundamentals of supply and demand in the Research Triangle Park. That investment thesis played out very quickly—much more quickly than he ever expected.

“Because of our vertically integrated team, we were able to quickly connect our in-house construction experts with Lenovo's facilities group and start a dialogue,” Doyon says. “This helped to get Lenovo comfortable with some of the engineering challenges associated with retrofitting the building for its use.  This combined with the efforts of our business team led to an extremely fast negotiation for a very large lease.  All in all, this is a tremendous turnaround story for a property that had been viewed as a classic suburban 'white elephant.'”

David Meline and Samir Idris of Cushman & Wakefield in Atlanta represented Rubenstein and Grubb in the sale of the property. They had local support from Scot Humphrey and Chris Norvell of Cushman & Wakefield | Thalhimer in Raleigh.