US Geared Commercial Property Investment
The US Geared Commercial Property Investment has acquired commercial property in prime locations in Boston with significant yield and value enhancement potential. The assets will be actively managed in order to maximise the return for investors.
The Investment is Boston focused with the potential to include other opportunities, particularly in New York and Chicago. The annual compounded return on equity is expected to be in excess of 15%.
Signature Capital is partnering with Synergy, a Boston based real estate investment and development firm, in this venture. We have successfully worked together on a number of US commercial property deals in the past.
We have raised $20 million, which includes significant investment by both promoters and distributors. This has generated a portfolio value of circa $60 million. The fund has invested in four properties located in Boston city centre. The Boston economy and commercial real estate market has performed very strongly over the last number of years and the outlook continues to be very positive.
100 Franklin Street, Boston, Massachusetts
In June 2008 Signature Capital acquired the Boston Stock Exchange Building. The 120,000 square foot building is located on Franklin Street, in the centre of Boston’s financial district. It was originally constructed in 1908, but underwent substantial renovation in 1998.
Negotiations on the termination of the Boston Stock Exchange’s (BSE) lease have been finalised. In estimating the potential IRR achievable on the deal over the next 3 years we had used a termination fee of $1 million and arrived at an IRR in the range of 19-24%. The actual termination package agreed was substantially higher, at $3.75 million, increasing the potential return significantly. We have also signed a new 15-year lease with a bank covenant for the space being vacated by the Boston Stock Exchange. The new rent includes increases of 3% p.a. and will have the affect of increasing the NOI by c. $400,000 a year. We have also secured a very favourable rate on the debt at 5.61% for 3-years.
141 Tremont Street & 27 School Street, Boston, Massachusetts
Two properties were acquired in July 2007 for $39.2 million. This investment holds a 25% stake in both buildings. They have a combined rentable area of circa 129,000 sq ft and are 100% occupied. At the time of purchase the assets were producing a yield (or cap rate) on average of 5.23%. As both buildings are substantially under-rented this cap rate would be equivalent to 6.5%.
4 Liberty Square, Boston, Massachusetts
4 Liberty Square is a seven story masonry building constructed in 1900 and renovated in 1988. It consists of 25,818 rentable square feet with a mix of ground floor retail and office suites above. The building is located in the heart of the Boston Financial District just off Post Office Square, and is serviced by excellent public transportation, restaurants, hotels and retail amenities. The property is currently fully let with the 4th floor, which was vacant at the time of purchase, recently being let for $38 per sq ft.