Equity Capital Management (ECM), a Chicago-based commercial real estate company focused exclusively on the net lease and sale leaseback sector, signed definitive agreements to sell up to $625 million of single tenant office, industrial, and retail properties under long-term net lease agreements.
"With investors paying premiums for stable in-place cash flows, this would seem to be an ideal time to recycle single-tenant assets with long-term leases in place," said Chris Macke, senior real estate strategist for CoStar Group.
The properties being sold include assets owned by ECM Diversified Income & Growth Fund and ECM Income & Growth Fund III, two investment vehicles sponsored by ECM. Each of the funds was focused on acquiring institutional quality, net leased, office, industrial and retail properties, primarily leased to investment grade tenants.
A substantial majority of the office and industrial properties being sold are corporate or regional headquarters and significant regional or critical hub distribution facilities.
ECB expects the property sales will close during the first half of 2011.
In announcing the agreements, ECM did not identify the properties under contract. However, last year, the firm had filed to take its portfolio public as a real estate investment trust called ECM Realty Trust. The offering has not yet been declared effective by the U.S. Securities & Exchange Commission.
In its preliminary filing, ECM listed its property holdings, including those of ECM Diversified Income & Growth Fund and ECM Income & Growth Fund III as of Sept. 30. The holdings included:
Tenant; Property Type; City; Rentable SF
MeadWestvaco; industrial; Raphine, VA; 619,637
AT&T; office; Tucker, GA; 406,292
FedEx; industrial; Grayslake, IL; 214,745
Solae LLC; office; St. Louis, MO; 171,750
Checkfree Services; office; Dublin, OH; 150,000
International Paper Co.; industrial; Marianna, FL; 114,595
Coca-Cola Enterprises; industrial; Shreveport, LA; 100,000
Novus International; office; St. Charles, MO; 90,722
T-Mobile USA; office; Brownsville, TX; 78,421
T-Mobile USA; office; Augusta, GA; 78,421
T-Mobile USA; office; Salem, OR; 69,000
CoStar News was unsuccessful in reaching officials with ECM to learn what impact the deals would have on the public offering or which of the listed properties were under contract. Besides its current portfolio, ECM identified more than 4 million square feet of properties it had under contract to purchase upon completion of its public offering.
In announcing the asset sales, James G. Koman, co-founder and managing partner of ECM said: "The assets being sold are representative of the type of properties we are looking for moving forward. As has been the case historically, the majority of these assets were acquired through off-market transactions as a result of our deep relationships with developers, corporations, and other institutional investors."
Added Joe Yiu, chief investment officer: "When we acquired these properties, we made our investment decision based on multiple exit strategies and long-term fundamentals rather than short term market conditions."
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