Agellan Commercial REIT has closed its acquisition of a Texas office property for a total purchase price of $18.25 million, representing a going-in capitalization rate of 8.16 per cent.

Located in the fast growing Techway and Energy Corridor in Houston, the two-storey commercial office facility has approximately 101,000 square feet of gross leasable area. It is currently 100 per cent occupied by three tenants.

Constructed in 2003, the building is part of a larger corporate office park, which has attracted many investment grade tenants. The lead tenant, National Oilwell Varco, occupies approximately 75 per cent of the property, and is under a lease agreement until 2020.

The REIT has obtained an interest-only five-year term mortgage of approximately $10.1 million at a fixed interest rate of three per cent. The balance of the purchase price will be funded through a combination of cash on hand and the REIT’s operating line.

Highlights of the acquisition include:

• Agellan is executing its growth plan by acquiring a well-located, high-quality property in a major U.S. market, which is experiencing significant growth.
• The property was acquired at an attractive relative valuation and is located next to several of the REIT’s current assets, providing economies of scale in key Houston submarkets.
• The property has an attractive lease maturity profile of approximately 6.5 years at contractual rates determined to be under market.
• Approximately 83 per cent of the property’s net operating income is derived from investment grade tenants.
• The acquisition is expected to be approximately three per cent accretive to Agellan’s forecasted adjusted funds from operations (AFFO) per unit.