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BIRMINGHAM, AL-In the largest area transaction to date this year, the partnership of Net Lease Capital Advisors Inc., Rainer Capital Management LLC and private investor Ray Gee bought the local 587,528-square-foot Social Security Center which had been developed and owned by the now bankrupt Opus South Corp. The partnership paid $170 million for the class-A office asset, of which $147 million was debt issued by lender Transamerica Life Insurance Co.

Opus South and the U.S. General Services Administration (GSA) built the structure at 2001 12th Ave. N. in 2005 to house 2,200 Social Security Administration employees. The structure was completed in early 2008. GSA paid approximately $15.4 million a year in rent. However, when Opus South Corp. filed for bankruptcy this past April, Transamerica Life Insurance ended up the successful bidder in the section 363 auction conducted by the bankruptcy court. The lender then turned around to sell it to the partnership. Jay O’Meara, senior vice president of CB Richard Ellis’ Atlanta, GA office was the transaction advisor.

The partners concede that two factors appealed when it came to the building. The first involves the tenant, which has 18.5 years remaining on its lease. “In our world of net lease deals, credit is important when it comes to the tenant,” explains Doug Blough, chief financial officer of the Boston, MA-based Net Lease Capital Advisors. “You really can’t get any better credit than the U.S. government.” Blough tells GlobeSt.com that another benefit is the lease structure itself, which doesn’t have any renewal options. “The GSA occupied its previous building for 50 years. At the end of this lease term, we’ll negotiate a new lease at the then market rent, and it’ll be for another 20 years,” he remarks. “I think that suggests a lot of future upside for a net lease deal.”

The second benefit to this particular building, notes Ken Dunn, president of Rainer Capital in Dallas, is the LEED-silver certification. In addition to being sustainable in terms of energy and water, the building has a natural grass-and-soil roof. “I think green is the wave of the future; buildings run much more efficiently under these guidelines,” Dunn tells GlobeSt.com. “Also, if the building is green, there is a much higher likelihood that the tenant will renew.” Dunn goes on to say that sustainable buildings are especially popular with federal government agencies, due to specific mandates.

Dunn and Blough note that this is a first-time deal for the three entities as a joint venture. The partnership is seeking additional assets. “We’d like to replicate this one,” Blough acknowledges, adding that the partnership has a building in the Midwest under contract. The types of assets the partnership is looking for are those that can be highly leveraged, with long-term, investment grade net leases.

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