Building Type: Flex – Single Tenant
Size: 205,074 Square feet
Investor: Family Trust
Strategy: 10 year hold
Sale Date: 2006
Purchase Price: $25,000,000
Sale Price: $41,000,000
Property was purchased with a defense contractor as the primary tenant (90% of the building) with the goal of a ten-year hold and sale. During the initial five years we were able to obtain a five year extension of the primary tenant’s lease. During that term, the tenant decided to sublease a portion of their space and the property became a multi tenant building. At the end of their lease, the tenant was struggling and opted not to renew.
The surrounding area continued to improve and the building’s location and design made it very attractive to high tech companies who needed office space, network operations centers as well as back up generation space – all of which could be offered by the property.
Our one challenge – high tech firms wanted a high parking ratio to accommodate a high density of employees and the property did not support that.
Neighboring land was purchased and additional parking was developed. The additional land gave us future development rights as well.
The increased parking ratio allowed us to be a lower cost alternative to the surrounding Class A office buildings and still offer the technology that high tech and telecom companies are looking for. This assured that we could substantially increase rents (well above market for similar properties), achieve 100% occupancy and substantially increase the assets value. The property was sold after a 20 year hold period and the owner achieved an IRR in excess of 13% for the overall investment and an attractive cash flow over the years.
460 Herndon Parkway