GlobeSt.com UPDATE: Canadian REIT Takes San Jacinto's Reins

"This is a rare opportunity for the REIT to acquire a property that is accretive based on the existing 65% occupancy, providing substantial upside through the ability to lease 250,000 sf of currently vacant space," Vinay Kapoor, IPC's president and CEO, says in a press release issued today. The high-rise's lead tenants are Ernst & Young, Clark Consulting and Merrill Lynch, leasing a combined 350,000 sf with expiration dates falling between 2009 and 2012.

As the REIT moved toward the closing, it was busy interviewing brokerage houses to lease and manage the 2121 San Jacinto St. asset. Y. Dov Meyer, the REIT's chief investment officer, tells GlobeSt.com that the decision will be announced next week. As for the closing with PNL Cos., a date has yet to be set, he says.

The REIT, staking its first claim in Texas, secured a $45-million, 10-year first mortgage, bearing a 5.27% fixed-rate interest, from the UK-headquartered Barclays Capital Inc. to make the close of the class A high-rise. According to the release, the first-year distributable income is projected at nearly $1.9 million, pre-interest on the acquisition line and non-controlling interest. The REIT's calculates the return on equity, including renovation costs, will exceed 13% at the present 65%-leased status.

The 22-year-old San Jacinto Tower has been on the market at least a year, with several contracts falling by the wayside. The seller is Red River LP, an affiliate of the Texas Teachers Retirement System and Farmington Casualty Co., part of the St. Paul Cos. Jeff Stone and Andrew Levy, senior directors in Dallas for Holliday Fenoglio Fowler LP, brokered the sale.

The Canadian REIT, which only buys US real estate, beneficially owns an 87% economic interest in IPC US and its affiliates. The portfolio of owned and managed assets total more than 8.5 million sf. The REIT was founded in 1998 by Paul Reichmann.