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Elman Investors Acquires Alabama Office Building
GlobeSt.com
October 21, 2003
By: Brian K. Miller
BIRMINGHAM, AL-Elman Investors of New York City has added r to its portfolio of government-leased buildings with the acquisition of a 53,000-sf building here for $9.2 million ($8.4 million plus closing costs).
Located across from two major federal courthouses, the four-story building is leased to the US Attorney General for the next 8.5 years. Lee Elman tells GIobeSt:com he closed a 6.5-year, 75% acquisition loan that carries an interest rate of 5.78% and has a 24-year amortization schedule. Elman says the cash-oncash return is 14% when the amortization of leasehold improvements is included. Without the amortization, the cashon-cash is closer to 10.5%, he says.
Elman Investors puts its own money into the investments as well as that of high-net-worth individuals. The company's government-leased portfolio includes 2.6 million sf in 28 properties located 19 states and valued at $293 million. Elman says his requirement is 11% cash-on-cash return after debt service. His preferred deal size is $10 million to $25 million. The company's typical hold is three to five years.
Elman says government leases are standard, as in Form 1217, and you basically negotiate the rent and the escalations and the expiration date, which is typically 20 years. The rest is boilerplate. In May, Elman told GIobeSt.com he was eyeing some $80 million in additional buys before the end of 2003.
In April, the company acquired an 80,900-sf office building in Anchorage. AK for $11.4 million, marking its first investment in the state. The three-story building is 100% leased to the US Department of Fish & Wildlife, which inked a new 10-year lease in 2002 and has leased the building since 1997. The property was purchased on behalf of private investors, but Elman is a co-investor and general partner. Elman says he expects the property to produce a cash-on-cash return in the "high teens" over a five-to-seven year period, including liquidation.
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