Investcorp adds to real estate portfolio with high yield acquisitions

3 Nov 2011

Investcorp’s US-based real estate arm today announced its two most recent equity investments, continuing an active year and demonstrating the firm’s selective approach and focus on high yielding assets.

Investcorp has just closed on its purchase of the seven-story Park Tower office complex in Long Beach, California for an undisclosed price. The deal gives Investcorp a Class A office tower in a major coastal metropolitan area. Park Tower closely follows Investcorp’s $37 million acquisition of the Bethesda Health City building in Boynton Beach, Florida. Both properties offer strong “going in” cash yields and enjoy high quality existing tenancy underpinned by the business and residential communities in Greater Los Angeles and the corridor between West Palm Beach and Ft. Lauderdale.

“These two properties complement our growing mix of investments selected for their strong and stable tenant histories, ties to growing metropolitan communities, and above-market cash yields,” said Herb Myers, a managing director in Investcorp’s real estate group. “We believe they will provide our investors with yields that look especially attractive given the forecasted period of low interest rates and economic conditions we face today.”

With these two acquisitions, Investcorp’s real estate team has invested approximately $300 million in eight new real estate deals this year, adding to its portfolio of retail, office, residential hospitality and medical facilities. While many of the properties enjoy close proximity to large commercial and economic hubs, they lie in often overlooked real estate markets where it is easier to secure private deals at attractive valuations. Hallmarks of Investcorp’s strategy include the May 2011 acquisition of Residence Inn Manhattan Beach just outside of Los Angeles, and Princeton Forrestal Village, an office and retail complex in Princeton, New Jersey acquired in January 2011.

“We are pleased with the year we’ve had and with our ability to be opportunistic in seeking out high quality assets at attractive prices,” said Brian Kelley, a Principal in the Investcorp real estate team. “Our deliberate and highly selective strategy is particularly well suited to a gradually stabilizing market. What’s more, comparable yields remain difficult to find from other asset classes.”

The 133,000 square-foot Bethesda Health City building, acquired in a partial leaseback transaction from Bethesda Health Systems (BHS), is situated on a 40-acre campus and is currently 98% leased by 17 tenants. The building has a track record of high occupancy and strong tenant retention that has consistently exceeded 90% since its 1996 opening, thanks largely to the high quality co-tenancy anchored by BHS. Investcorp provided 80% of the equity for the acquisition, with the remainder of the equity coming from its joint venture partner, Flagler Investments.

The Long Beach, California Park Tower office building is a 120,000 square-foot facility serving the communities of Los Angeles to the north and Orange County to the south. It is currently 96% occupied by a diverse base of 25 tenants providing a stable long term income stream. The largest tenant is the nonprofit ChildNet, which has recently expanded its use of space in the building. Investcorp provided 100% of the equity for the Long Beach transaction.