CoStar Group - May 12, 2010
What do you do in this market if you're raising money like crazy to invest in commercial real estate -- as much as $100 million a month? If you're Cole Credit Property Trust III Inc., a non-traded REIT in Phoenix, AZ, you spend like crazy, too.
The registered REIT sponsored by Cole Real Estate Investments is in the midst of a two-year public stock offering that has been ongoing since October 2008. As of May 1, Cole Credit III had raised $1.5 billion. So far, it has invested primarily in retail-related buildings net leased to investment-grade and other creditworthy tenants, typically necessity retailers such as drug stores, family restaurants and home improvement stores.
But now the REIT has an even bigger fish on the line. On April 30, one of its subsidiaries agreed to spend $310 million to purchase the 583,000-square-foot City Center at 555 110th St. in Bellevue, WA - a hefty $530 per square foot.
The property is 99.6% occupied, of which approximately 96.3% is subject to a net lease with Microsoft Corp. that expires in June 2024. Microsoft is currently paying an annual base rent of $18.8 million - an amount that increases annually by approximately 2.4% of the then-current annual base rent.
An affiliate of Beacon Capital in Boston, MA, currently owns the building and up until last month had reportedly been in discussions to the sell the building to a German investment fund for about $286 million.
Cole Credit III is expected to close on the deal by June 18, 2010.
This is not the typical deal for the Cole Credit III. As of May 5, it owned 205 properties in 37 states, comprising approximately 5.3 million gross rentable square feet of commercial space and approximately 6.3 million square feet of land subject to ground leases. The typical deal size has been in the $1 million to $6 million range. And that still makes up the bulk of its activity
Besides, the City Center, it is also under contract to make the following purchases this month.
LA Fitness - League City, TX, 45,000 SF, for $7,335,000.
Walgreens - Rocky Mount, NC, 14,820 SF, for $5,863,000.
O'Reilly Automotive - Central, LA, 6,800 SF, for $927,000.
Evans Exchange - Evans, GA, 194,960 SF, for $19,500,000.
Lowe's - South Lebanon, OH, ground lease, for $4,808,000.
Kohl's - South Lebanon, OH, ground lease, for $3,125,000.
White Castle - South Lebanon, OH, ground lease, for $467,000.
Northern Tool - Ocala, FL, 26,054 SF, for $3,518,000.
Walgreens - Lancaster (Palmdale), CA, 13,650 SF, for $5,537,000.
Walgreens - Beloit, WI, 14,820 SF, for $4,310,000.
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