GlobeSt.com EXCLUSIVE: 239,000-SF Office Project Trades Hands

TACOMA, WA-Centennial I & II, a 239,000-sf state-leased suburban office complex here has changed hands for slightly more than $41.2 million. The new owner is NGP Capital Partners, a McLean, VA-based company that invests in properties leased primarily to government tenants. The seller was New York-based Elman Investors. The state has seven or eight years left on its leases in the building. Centennial I was built in the mid-1980s and Centennial II was built in the early 1990s. The state Department of Social and Health Services occupied most of the space. The buildings are located at 2121 South State St. and 1949 S. State St., near the headquarters of the city’s major daily newspaper, Tacoma News Tribune. Elman Investors founder Lee Elman tells GlobeSt.com that the sale price translates to an 8.5% capitalization rate for NGP, which stands for National Government Properties. Elman acquired the property two years ago for approximately $35.5 million, which represented a 9.5% capitalization rate. As part of the transaction, Elman says NGP assumed about $25 million in conduit financing at an “attractive rate.” Like NGP, Elman Investors invests in buildings leased to government tenants. Elman says he looks to acquire four different types of government leased properties: buildings with shorter term leases in place where the company’s perception is the government will renew its lease; semi-development projects, where the property needs upgrading or can be expanded and the owner doesn’t want to deal with it; buildings in tertiary locations with solid leases in place; and buildings in international markets such as Canada.In October, Elman acquired a 130,000-sf building in St. Albans, VT for slightly more than $25 million. The building is leased for the next 17 years to the federal General Services Administration on behalf of the US Citizenship and Immigration Services bureau of the federal Department of Homeland Security. In March, Elman took his government-leased building investment plan outside the US for the first time, buying an office asset in Canada occupied by the government of Saskatchewan for at least the next six years. Elman Investors paid about $10 million for the 80,000-sf building. The Tacoma sale leaves Elman’s government leased property portfolio to 30 properties totaling about 2.6 million sf with an aggregate value of about $300 million. Elman says he has another $60 million to $70 million worth of properties in the acquisition pipeline, of which $20 million to $25 million worth should close before the end of the year.