Overview
- Updated On:
- September 13, 2021
Description
CCI currently has 800 Brazos, a 95,757 SF Class B office building in downtown Austin, under contract at $3,800,000 ($39 PSF) with a scheduled year end closing on December 27, 2011. This unprecedented opportunity is approximately 10% of replacement cost. The Seller is 800 Brazos Syndicated Holdings, LLC consisting of Bank of America & Comerica Bank. The Seller originated an approx. $5,500,000 ($58/SF) note to previous owner and foreclosed on the property in 2011. CCI has a relationship with the Seller and has been actively tracking this Property since January 2010. We were awarded this incredible year end opportunity as a result of the bank seeking to clean up their balance sheet and dispose of unwanted assets. This investment has a 8% preferred return, structured with a 50/50 GP/LP split and CCI’s normal fee structure.
This building is 32% occupied and leasing at the subject was neglected by both the previous owner (underwater and not willing to invest additional capital or tenant improvement dollars) and the property’s lenders (not wanting to invest additional capital to market the subject for lease). As the owner of the Perry Brooks building (136,585 SF) and 505 car garage directly across the street from Brazos Place, CCI knows the local brokerage firms/vendors and will give the property instant credibility. CCI’s excels at buying “right” and a low basis in this asset will afford CCI the opportunity to be the low cost landlord among the competitive set. Post-closing, CCI will aggressively market the subject for lease at rates less than the competing properties.
Using conservative numbers, CCI estimates a worst case 12% unleveraged IRR over the course of 7 years. This analysis includes rental rates ranging from $8-14/SF NNN, which is 22-55% below market rates of $18/SF NNN in the Perry Brooks building (a CCI owned asset directly across the street from 800 Brazos). The fifth floor commercial condo unit is leased at $11.75 NNN and could be sold off at $150 PSF significantly reducing the basis in the property. Additionally, CCI has modeled a slow lease up over the course of 3 years which is a long time for such a small asset. In order to facilitate execution of the business plan, post-closing CCI will be seeking a 3-5 year bridge loan totaling $3,500,000 for enabling a partial return of capital and for future funding/good news money to cover capital improvements and leasing expenses. Finally, CCI is modeling a 9.5% exist cap rate, which is high for downtown Austin, one of the most attractive office markets for investment in the country.
Despite conservative assumptions, given CCI’s total basis of $7,300,000 (see above), the equity investment grows from $2,500,000 at closing to $4,813,884 (+/- 2.0x the original investment). Post closing CCI anticipates to relocate into the building and pay rent on 5,000 SF. We have interest from three prospective tenants with one tenant looking for 20,000 SF and are touring the building next week. The lowest price trade in Austin CDB over the last 5 years has been $175 PSF for a Class C Building. CCI is acquiring a Class B asset for $40 PSF
We would kindly appreciate a timely response regarding your level of interest in this investment. We are available to answer any questions you may have, and can be reached by phone or e-mail. Lastly, in the event you have friends or family who are qualified investors, and who you believe might be interested in these types of real estate investments, please feel free to forward this e-mail to them.
