Albany Road Revving Up Program; $25M Committed for CT, RI Assets

As reported in The Real Reporter by Joe Clements

HARTFORD, CT — When chasing commercial real estate, Albany Road Partners possesses a broad geography, as evidenced from the fledgling Boston firm’s first three conquests that are all outside its host state. Having scooped up a New Hampshire shopping center in July shortly after launch, the operation led by President Christopher J. Knisley on Friday paid $11.3 million to land a four-property, 1,462-unit self-storage portfolio in Greater Hartford, and is slated in the coming days to buy a 139,700-sf office asset near T.F. Green Airport in Warwick RI. The pricing of $13.5 million for Metro Center II would put the Albany Road platform near $40 million YTD with a like amount in queue and slated to close over the near term. An unnamed Massachusetts asset could be in tow over the next week, according to sources, which would give Albany Road holdings in four of the six New England states.

While declining to discuss pending trades, Knisley tells the Real Reporter, “We are thrilled by the way things have been going.” The firm intends to spend $100 mil- lion annually on a diverse stripe of assets backed by high net worth investors and other capital. “We seem to be right on track for that,” says Knisley of reaching the first year target. The institutionally trained investment sales specialist is pursuing value-add offerings beset by solvable problems whose resolution can yield robust returns. Knisley says there is a deep pool of sources “on the sidelines” waiting for the expected tide of discounted assets needing fresh capital and resources. The New Hampshire shopping center was bought out of foreclosure, and is already being positioned for a rebound, reports Knisley, whose Connecticut self- storage package saw occupancy drop to 72 percent after traditionally performing in the 80 percent sphere, a level the buyer insists can be recaptured. The road to recovery has begun already, says Knisley, with his firm retaining management experts CT Self Stor (CSS) to oversee two properties in Simsbury, another in Bloomfield and the final in Waterbury. The principals of CSS have been in the self-storage business spanning four decades and have retained an 88 percent occupancy level for their current holdings. Knisley says having that firm on the ground will be a marked improvement because the prior manager of the portfolio was in upstate New York. “We look forward to beginning a relationship with this very experienced group that we hope will lead to other opportunities in the future,” adds Knisley, with Albany Road hoping to acquire in excess of $50 million in self-storage properties over time.

Among those who maintains CSS will help Albany Road achieve its aims is Patrick Lemp, whose Hartford-based company Italia & Lemp has a varied appraisal and consulting business. Lemp also has a lengthy history in the self-storage arena, and says he thinks there are various ele- ments in place with the Hartford portfolio that make for a good amalgamation. For one thing, the Bloomfield and Simsbury proper- ties are within seven miles of each other in an affluent part of Hartford County. One of the Simsbury facilities is across the street from a new Biy Y Supermarket being con- structed as well as a 200-unit multifamily community. “Good things are happening there,” says Lemp, who adds the fourth center about 25 miles away from the others in Waterbury benefits from Interstate 84 visibility—key to marketing units in the post-Yellow Pages universe—and has an expansion opportunity.

Size matters as well in terms of economies of scale, and Lemp says the Hartford portfolio is on the high end in terms of a typical New England self-storage listing, estimating less than a handful of that many units would trade annually together in New England. “It was a unique opportunity that doesn’t come along very often, and Albany Road seized it,” says Lemp, whose client had an unusually tight time frame and required a buyer who could perform. No problem there, it turns out, according to Lemp. “I’d say this was one of the smoothest transactions I’ve ever been involved in,” he says. Albany Road “was a pleasure to work with.”

Eastern Bank financed Albany Road with a $7.5 million mortgage that will pro- vide proceeds necessary to boost occupan- cy through marketing and capital improve- ments. The largest of the quartet is at 1280 Hopemeadow St. in Simsbury, a 465-unit facility totaling 73,000 sf on 5.9 acres. Once above 80 percent, occupancy there today is just 66 percent, and Knisley says Albany Road and CSS feel upbeat about lifting that figure.

The second Simsbury building is at 123R West St., a 3.7-acre parcel containing 254 units and 32,625 sf of rentable square footage. That four-building complex was constructed in 2006 and is the youngest in the mix. A slightly larger (301 units, 36,850 RSF) property at 29 Old Windsor Rd. in Bloomfield is considered a stable asset that benefits from a daily traffic count along Route 305 of 12,800 vehicles. Branded Blue Cube Storage, the five-building facility “is in very good condition” relays Knisley, and no significant capital improvements are need- ed there at present.

The final center is Waterbury Self Storage at 2454 East Main St. in New Haven County. The 4.6-acre site sports 406 units developed in a half-dozen buildings (44,750 RSF) in 1988. Attributes include a high percentage of renters in the area and the visibility from I-84 along a densely developed commercial area that has occupancy in the 90 percent level. Waterbury Self Storage is not in need of extensive upgrades, although landscaping and parking lot improvements are budgeted in the $50,000 range.

The Rhode Island office property next on Albany Road’s dais has weathered a state economy with double-digit unemployment and is being acquired from an owner given a fleeting chance to pay off an oversized Unum loan by some estimates carrying an LTV in the mid-90 percent range.

While acknowledging its pending pur- chase, Knisley declined to discuss financial elementsofthatdealgivenithasyetto close, but observers report Albany Road is acquiring Metro Center II for approximate- ly $97 per sf. The supposed beauty of the opportunity is in landing a fundamentally sound, cash-flowing property populated by mostly credit tenants and doing so for roughly 55 percent of replacement cost. The top two occupiers—United Healthcare and the US Coast Guard—lease one-third of the space and have commitments with the earliest expiration not occurring until mid- 2017. One analysis shows rental rates in the $21 per-sf-range and reaching nearly $29 for select space. Metro Center II was deemed “best-in-class” for Rhode Island’s second largest city, whose population of 82,000 makes for a substantial southern New England enclave that has brought such tenants as AT&T, Entercom, Konica Minolta and Prudential through Metro Center’s doors.

Stable cash flow and the chance to lease up the estimated 20,000 sf remaining unfilled were among the attractions that were touted by Metro Center II’s brokerage tandem that includes Hayes & Sherry and Cushman & Wakefield. Bank Rhode Island was encouraged enough to loan Albany Road $9.2 million and offer another $800,000 for tenant improvements and other lease-up costs.

“It’s a gorgeous piece of real estate in the state’s strongest (office) submarket and has just a phenomenal rent roll,” Knisley says of the asset that he adds should benefit from a pro-business atmosphere in Warwick.

Looking forward, Knisley says Albany Road has identified several other promising assets in its $15 million to $20 million target area which he anticipates will keep the acquisition ball rolling into 2013. As for the current holdings, he says “it does speak to the breadth of our platform” which counts all of New England in Albany Road’s realm.