HOUSTON-A high cap rate and low price per square foot prompted
Hartman Income REIT to make its first buy of 2009, that of two
class B office buildings in the northwest submarket. Koll Bren
Schreiber Realty Advisors of Newport Beach, CA sold the assets,
which totalled 199,899 square feet, for well above an 11 cap.
REIT president Allen R. Hartman tells GlobeSt.com both the
128,891-square-foot Northchase Center at 14550 Torrey Chase Blvd.
and the 71,008-square-foot Cornerstone Plaza at 3707 Farm-to-Market
1960 West located one mile east are well-maintained assets, with
occupancies between 90% and 92%. Tenants at Northchase Center
include Valassis Communications, Inc., Frontline Group and Discount
Tires, while Cornerstone Plaza has McDonald's Corp. as well as
other tenants.
Hartman acknowledges the portfolio is a somewhat unusual buy for
the REIT, which
focuses on office buildings and shopping centers with a value-add
potential. The deal's appeal involved the cap rate and price per
square foot.
Though the actual purchase price was kept under wraps, "these
were under contract about a year ago for about $78 per square
foot," Hartman says. Furthermore, Harris Central Appraisal District
values the assets at between $50 per square foot and $60 per square
foot. Hartman says the actual sales price was lower than last
year's contract and the assessed value.
Mark Lucescu of Lucescu Realty in Newport Beach, CA represented
KBS. Hartman Income REIT was represented internally by Dave
Wheeler. There is significant tenant roll on both buildings during
the next couple of years, though Hartman says rents aren't going to
budge much from the $13-$14 per square foot they are now. "The
upside is in the cap rate," he says. "Hopefully we can hold this,
and turn it around for a different cap rate during a different time
and cycle in the market."
Hartman goes on to say, however that the current time and cycle
is a great time for buying, the best he's seen in 15 or 20 years.
Waiting for the market to bottom out was one reason why Hartman
waited to buy; the other reason was the Real Estate Investment Trust
needed more funding because of last year's acquisition of six
properties.
These days, the market is very close to bottoming out if not
there already, and Hartman's plan is to raise $50 million for more
acquisitions. Furthermore, seller expectations are starting to come
more in line with market reality. As a result, 2010 and 2011 will
likely be quite active for Hartman Income REIT. "We're looking at
buying anywhere between $20 million and $30 million next year,"
Hartman says.