A Texas-based private equity real estate manager has acquired a two-building, 194,664-square-foot office building in Alpharetta, about half a mile from the Avalon mixed-use development.
Velocis of Dallas had been eyeing Parkway 400 for several years since it went back to a special servicer, even making an offer 3-4 years ago that was ultimately rejected. It finally got its hands on the property in an online auction last November.
Velocis Parkway LP acquired 11720 and 11800 Amberpark Road in Alpharetta from WBCMT 2007 C31 Amberpark Office GP LLC/WBCMT 2007 C31 Amberpark Office LP for $39.58 million, according to Fulton County property records compiled by American City Business Journals Leads Division.
The seller, LNR, charged a 5 percent commission on top of the winning $37.7 million bid, said Velocis Partner Jim Yoder, who with his partner Mike Lewis are in Atlanta once a quarter looking for property to acquire. The sale was announced Nov. 30.
Parkway 400 Building is 50,894 square feet over two stories. Parkway 400 II is six stories and 143,770 square feet.
Velocis likes to buy buildings out of foreclosure because of their value-add opportunity, Yoder said.
But Avalon, which is about 300-400 yards from Parkway 400 (0.04 miles on Google Maps) was the draw for the acquisition. Yoder and his partner saw Avalon’s effect on the Alpharetta market as comparable to the growth that’s happened around The Shops at Legacy in the Legacy Business Park in Dallas.
“We live and work in Dallas. We saw an explosion of development at Legacy and The Shops at Legacy,” Yoder said.
“We have been blown away by the pent-up demand for space within walkable distance to Avalon,” he said.
The building has gone from 79 percent leased to 89 percent leased within the first 60 days of Velocis’ ownership, including expansions by existing tenants and new leases, according to Yoder. One new tenant is new-to-market co-working space company Office Evolutions, which leased 9,801 square feet for 91 months, or more than 7.5 years.
Existing tenant Kimley-Horn and Associates expanded by 4,718 feet to take the entire sixth floor of the six-story building in an 86-month lease term. Pioneer Underwriting, an insurance company, expanded by 2,748 square feet for a total of 5,114 for 64 months. And the Law Offices of Christopher Miller expanded by 2,564 feet for a total of 3,942 for 59 months. Lease terms were confidential, but Yoder said the company is getting higher rents than it underwrote as part of the deal.
“We bought the buildings quoting 26 to 28 dollars a square foot for rents. One of the expansion tenants is paying in the 30-dollar range,” he said.
If a pending letter of intent with a prospective tenant for 7,500 square feet is signed and a lease agreement follows, it would bring the property to 94 percent leased, Yoder said.
Parkway 400 will also benefit from the development of two hotels next door and immediately adjacent to it. A Courtyard by Marriott is under construction now and an Even by Intercontinental hotel is slated for construction soon, a Velocis spokeswoman said.
Velocis plans to invest $500,000 to $1 million to upgrade Parkway 400, including a $100,000 “major overhaul” of the landscaping and grounds to be overseen by property manager Colliers International, new entry doors and furniture, enhancing and enlarging the fitness center and looking at food service, Yoder said. But it’s not a total repositioning.
“We think guts of the building are very healthy and strong. It’s a nice simple rectangular layout that works for tenants. It’s in good condition today. We are going to buff it and make it shine,” he said.
Velocis’ first purchase in the Atlanta market was also in Alpharetta, the 152,935-square-foot Royal Centre One office building, purchased in 2013.
More Atlanta-area investment could be ahead. “We have looked hard at Midtown, we like the dynamics there. We will continue to look in North Fulton and Midtown. We like creative office in West Midtown,” Yoder said. “We are probably staying away from the area of the 400/285 interchange for a bit just because of the construction – it’s pushing people to the north or south.”
“We are active. We have $300 million of dry powder, so to speak, that we would like to place. We would like to put some more of that into Atlanta.”
Velocis consists of two entities: Velocis Funds and Velocis Advisors. Velocis Funds are private equity real estate funds, active in the acquisition, operation/management, and disposition of commercial real estate in the United States. Additionally, Velocis Advisors provides asset management and advisory services to both investors and real estate clients.
“We are a value-add fund. We buy traditional office, medical office and retail — retail is most difficult to buy in this cycle,” Yoder said.
Velocis has bought four properties in the last six months of 2017, Yoder said. In addition to Atlanta, it likes Charlotte and Raleigh, N.C., and has bought in Washington, D.C. as well. “We are selling in Texas; we think Texas is at full value.”
Georgia, the Carolinas and Florida will be a big focus for Velocis in 2018, he said.