New Buyer Wins Second Deed From Triple Net

SAN ANTONIO-In a month's time, a new buyer in Texas has won its second piece of class A real estate in a dogged pursuit of office dispositions by Triple Net Properties LLC. And, it's heading into the final stretch of due diligence for a third property in Central Texas.

"Triple Net seems to be our frontrunner right now, but we're not closed off to others," Tamarin Preston, director of legal affairs for Newport Beach, CA-based Chase Merritt, tells GlobeSt.com. "We're always looking for deals from anybody." The investment group, which launched in October 2005, will spend at least $100 million by year's end. To date, $48 million has landed in Triple Net's hands for properties in San Antonio and Austin.

Chase Merritt has just closed on a 131,000-sf, 90%-leased landmark at the Loop 410-Perrin Beitel Road intersection in San Antonio's northeastern quadrant. The 101,000-sf Titan Building at 2700 NE Loop 410 and 30,000-sf Titan Plaza at 8200 Perrin Beitel Rd. went for $15.3 million. Triple Net's T REIT Inc., a public company, owned 48.5% of the complex and tenant-in-common investors controlled the rest.

In late June, Chase Merritt and its Newport Beach neighbor, Buchanan Street Partners, paid $32.96 million for the 206,770-sf AmberOaks III in northwest Austin from the T REIT, which was a 75% stakeholder. And the next piece is planned to be AmberOaks V as the first-time JV partners swoop in for the 281,885-sf balance of the eight-building development. Preston says the calendar's marked for an early September closing.

The T REIT is lowering the curtain on two- to four-year holds. "At Triple Net, as part of our investment strategy, it is standard practice for us to continually monitor the national, regional and local real estate markets," says Thomas C. Young, senior asset manager for the Santa Ana, CA-based investment group, "and determine the best time to sell each property to maximize the price and to realize the value we have created for our investors and shareholders."

Triple Net still owns three properties in San Antonio, but only one's for sale--the 91,266-sf Camelot Plaza at 5702-5820 Walzem Rd. It's holding onto the 102,413-sf Brookhollow Park at 911 Central Parkway North and 171,124-sf Fountainhead Park I and II at 4511 and 4545 Horizon Hill Blvd., respectively.

Preston says Chase Merritt has Transwestern Commercial Services Inc. leasing and managing its California properties and it will be doing the same in Texas. In fact, Transwestern broker Alan Grilliette sold the 7.6-acre Titan complex to the T REIT in April 2002 for nearly $9.2 million and was part of the team for the latest hand-off.

"It's just atypical for a suburban office building," Grilliette says, citing the mahogany lobby and elevator finishes in the six-story tower. He says the proof is in the 17-tenant roster--67% filled by national credit tenants with no lease roll until the beginning of 2008. "It's a landmark property with great name recognition," he says about its drawing power.

Grilliette says the Triple Net listing was widely marketed, with 21 offers going on the table. "There's a strong demand for investment real estate and San Antonio is a preferred market due to the overall dynamics of our market," he says.

Besides Grilliette, the seller's team included Jeff Hanson with Grubb & Ellis Co. in Newport Beach and Triple Net's Young and colleagues David Mellor and Philip Hurst. Chase Merritt was represented by Rob Mitchell in the Anaheim, CA office for Woodland Hills, CA-based VOIT Cos. Greenwich Capital Financial Inc. in Greenwich, CT provided financing.

Preston says it's just a coincidence that Chase Merritt's aggressive buying spree began in Central Texas. "We are looking all over the country," she stresses. The target markets include Arizona, Northern California, Missouri, Oregon and Washington. And, she confides, there are contracts waiting to be signed for properties in Missouri and Northern California.

The criteria include a high internal rate of return. "We make money from the cash flow and selling it at a higher cap rate later down the road," she explains. "We like to see stabilization in the project." The holding period hinges on the market.

Preston admits there's more than one motive for trailing Triple Net. "We're hoping to establish a track record," she says. The end goal is to build a relationship that might one day lead to off-market deals. And though it's not part of current buying spree, Chase Merritt is building a $500-million opportunity fund, making the early-on relationships key to its long-range strategy.