As reported in The Real Report by Joe Clements
EXETER, NH — In one of New Hampshire’s largest CRE transactions of the decade, Albany Road Real Estate Partners has acquired a 509,000-sf business park at Interstate 95 here for a consideration of $51.0 million in a just-completed off-market agreement, with financial backing from Citizens Bank to the tune of $43.7 million. The seller of 100 and 200 Domain Dr. is Altid Enterprises of Cambridge. The pact by Albany Road is significant beyond the price tag or sheer size of the acquisition, its agreement helping the Boston-based company founded in summer 2012 by President Christopher J. Knisley to crest $500 million in volume acquired during those years, and to exceed five million sf in holdings. The diverse platform which now extends to the southeastern US but remains focused on New England was launched in the Granite State via a shopping center purchase three years ago this past summer, an under water asset Albany Road recently divested for a sizable return.
“We find the opportunity compelling,” Knisley says of the latest deal in pointing to a Who’s Who of tenants at the park ranging from Bauer Hockey and Garnett Hill to Liberty Mutual Insurance and footwear giant Timberland. Those four anchor tenants represent 96 percent of the asset’s annual revenue and their weighted average lease expiration runs into the next decade, May 2021. According to Knisley, “because of their excellent location, rich amenities and functional floor plates, 100 and 200 Domain Dr. are buildings that have historically been in high demand,” with tenants attracted by “an abundance of intellectual talent” clustered along the Maine/New Hampshire border, citing past occupants of the park including Apollo Computer, Hewlett-Packard and TYCO.
Timberland occupies all of 200 Domain Dr., its commitment expiring in 2020, with Knisley describing that scenario as upbeat in either retaining that top-flight company or repositioning the space in an improving market which is the tightest in southern New Hampshire. The companion building has longer-term leases among several denizens. The previous steward took “excellent” care of the properties, relays Knisley, with over $10 million spent on comprehensive renovations to interiors and exteriors as well as the repair or outright replacement of key building systems.
“Altid Enterprises has been a pleasure to work with through this transaction,” Knisley stresses, calling the firm “extremely well-respected in New England real estate circles” whose principals “have done a fantastic job re-developing and re-tenanting 100 Domain Drive” even in the face of a harsh economy regionally from 2008 to 2012. Altid principal “Ed Carye and I have had a long-standing relationship that dates back to the mid-1990s,” explains Knisley, prior to his launch of Albany Road was an institutionally trained investment specialist whose prior stops included Copley Real Estate Advisors and Berkeley Investments.
Thanks to that shared history with Altid, Knisley says “there was a high degree of certainty between us in terms of performing in the agreed-upon time frame while also maintaining strict confidentiality throughout the process.”
For Albany Road, the purchase checks off several boxes such as a favorable cost basis as a discount to replacement levels, consistent cash flow, and being acquired at a time when the firm was able to take advantage of a favorable credit market. “The current rent roll of the buildings speaks for itself,” Knisley observes, whereas his firm’s investors “will benefit from predict- able revenue streams” and can expect a value-add element leasing up a small portion of office vacancy and converting 50,000 sf of warehouse to additonal office product. That piece represents the major vacancy in the complex.
Developed in 1984 on a combined 60.8 acres, the two buildings are similarly sized, 100 Domain Dr. slightly larger at 263,000 versus 246,000 sf at 200 Domain Dr. The park has over 1,600 parking spaces on a site large enough it spills into abutting Stratham. Bauer Hockey is the largest of a half-dozen tenants at 100 Domain Dr., that firm leasing 75,400 sf through April 2023 versus 56,825 sf for Liberty Mutual (Feb. 2019) and 40,500 sf by Garnet Hill (Dec. 2022), those agreements like Timberland’s all triple-net terms.
Knisley expresses optimism that the 61,000 sf of existing vacancy can be filled to boost the bottom line, noting that the Seacoast has a vacancy rate of just 8.6 percent, the only submarket in the state in single digits and half the overall average rate of 17.4 percent for 12.9 million sf tracked by Cushman & Wakefield. The average gross rental rate is also stronger, running $20.64 per sf versus the average of $17.58 per sf.
The Citizens Bank financing consists of $33.2 million at the closing and the remainder to be used for capital improvements, tenant fit out and leasing commission, so-called “good news” funding spurred via new leases. “Citizens really stepped up,” Knisley says of the bank’s winning proposal after being offered up to multiple debt sources, with Senior VP Phil Wadleigh structuring the intricate loan package which has a mix of fixed and floating rates plus elements such as interest only for a portion. “It met all our needs,” Knisley says.
Knisley also addressed the milestone achievements attained in the exchange on both gross asset value now at $530 million and having crested the five-million-sf in holdings mark, over 10 percent of that inventory coming in the Exeter purchase. Albany Road now has 37 properties from New England to Georgia, North Carolina and Tennessee, with the firm opening an office last year in Nashville to focus on that region. “We’ve got a great team in place and are confident in our ability to continue to find attractive, risk-adjusted opportunities in the markets and space in which we operate,” Knisley says. Other highlights of 2015 include adding six more professionals to the operation, the purchase of seven more assets stretching from Portland, ME, to Atlanta in a variety of product types; and averaging a net 12.8 percent cash distribution for a participant who had invested an equivalent amount in every opportunity since Albany Road’s inception.
In the case of the firm’s first invest- ment, Amherst Crossing in Amherst, NH, the 130,000-sf retail property purchased at auction in Sept. 2012 for $8 million yielded its investors net cash distributions of 15.3 percent and a net IRR of 28.2 percent from last summer’s trade, its value accreted by an asset management campaign that led to renewing and extending existing tenants, completing lease-up of a vacant out-build- ing and cutting the tax assessment by 40 percent.