42,000-SF Buy Completes Exchange

JUSTIN, TX-SkyWalker Property Partners LP and its Hangover Opportunity Fund LLC used remaining proceeds from a 1031 exchange to acquire a five-acre tract with 42,259 square feet of industrial space. The asset sold to facilitate the exchange was the fund’s first ever buy: A 32,625-square-foot pad site in Hurst, TX that was sold to Wells Fargo, NA in fall, 2011.

The acquisition of the property at 9434 Industrial Rd. from Valliance Bank represented the second part of the exchange. The first part of the exchange brought the fund Grapevine I and II, a 58,860-square-foot office complex at 3500 and 3600 William D. Tate Ave. in Grapevine, TX. “We don’t typically reinvest sales,” explains Gary Walker, president of Skywalker Property Partners. “This was a unique circumstance.”

What Hangover Fund does do, however, is target distressed assets, buy them, fix them up and lease them up after a three-to-five-year hold, on average. This is the fund’s plan for its most recent buy; Jeff Givens and Todd Hawpe with Transwestern’s Dallas office have been tapped to find a tenant or tenants for the asset, and the first lease could be signed sooner rather than later. “We have a prospect for half of it pretty far along,” Walker tells Globest.com.

Renee Efimoff with SkyWalker Property’s sister company SCM Real Estate Services represented the buyer. Michelle Hudson with Hudson Peters Commercial in Dallas negotiated on behalf of Valliance Bank.

The Hangover Fund was launched in 2009 to target distressed deals between $1 million and $10 million with a value-add component.  This is what happened with the Hurst asset, which was acquired in 2010 because of the redevelopment opportunity it offered. The fund’s goal is to acquire $100 million of distressed and value-add assets in Texas and surrounding states.

In discussing the fund’s most recent transaction, Walker says the asset could work for either a single user or multiple users. “The user there before was operating in multiple structures. Historically there has been one user and multiple buildings,” he comments.

Walker acknowledges that finding the ideal assets for the fund has been somewhat difficult, primarily because Texas has been one of the few states that hasn’t experienced a slew of troubled assets tumbling onto the market. “Most of the problems we see here is that the sponsor wasn’t qualified or got overleveraged,” he comments. “In those situations, the borrowers and lenders are still trying to work it out.”

Walker says the local property had been on the market for awhile and Valliance had lowered the price when it caught the fund’s eye. “They were interested in getting this deal done by the end of the year, and we were able to do that,” he says. There are a couple more deals in the pipeline for purchase, he went on to say, one of which is a 30,000-square-foot, single-tenant asset.