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AmEx campus sold to German firm for $73 million

An active German real estate investment fund has acquired the American Express campus in Plantation for $73 million, or about $194 per square foot, according to a document filed with the Securities & Exchange Commission by the seller, Inland Western Retail Real Estate Trust.

The new owner of the 376,350-square-foot complex is an affiliate of Frankfurt-based KanAm Grundinvest Fonds, which has an office in Atlanta. The vintage campus west of North University Drive and south of Cleary Boulevard is leased to American Express Co. for another eight years.

The primary street address is 777 American Express Way.

The KanAm group actually acquired four large corporate properties from Inland Western around North America, all leased to AmEx, for a total of about $271 million. Inland Western had purchased those properties and four others from AmEx about three years ago for a total of $390 million, and leased them back to the credit card and travel services company.

The Plantation campus was valued at $63 million for the purposes of that transaction.

The Inland Western REIT, affiliated with The Inland Real Estate Group of Companies in Oak Brook, Ill., announced the total price and general locations of the four properties sold to KanAm.

An SEC filing further detailed the transaction specifics; a $73 million price for the Plantation campus, along with $95.2 million for 1001 North 3rd Avenue in Minneapolis, $63 million for 20022 North 31st Avenue in Phoenix, and $42.3 million for 101 McNabb Street north of the border in Markham, Ontario.

The document also specifies that KanAm assumed about $37.17 million in existing mortgage debt secured by the Plantation property. CB Richard Ellis brokered the portfolio sale on Inland's behalf.

Inland Western is one of several so-called private REITs that raise equity capital from mostly individual investors and invest into income-producing real estate. It owns some 300 retail and net-leased properties, totaling well over 45 million square feet.

KanAm sponsors real estate funds managing European and American property investments on behalf of various types of investors. Given the devaluation of the dollar relative to the Euro, European investors have become more active of late seeking perceived bargains over here.

While commercial real estate investment clearly cooled amid disarray in the credit markets over the second half of 2007, office property prices and sales activity in the Miami area were up notably over the previous year, according to New York deal tracker Real Capital Analytics.

Overall investment activity increased 21 percent to more than $2 billion, with the average price per square foot appreciating 14 percent to $244. The average capitalization rate, or going-in yield to the investor, was 6.3 percent, RCA reports.

Another institutional investment manager with global ties, ING Clarion Partners, recently acquired Schever International Plaza, a 10-year-old, 100,000-square-foot multitenant Class A complex in Boca Raton. The $29.9 million sale price factors to about $300 per square foot.

The difference in per-foot valuations appears to reflect the "fixed return" a buyer can expect from the investment during the balance of AmEx's lease, noted office specialist Jay Adams, first vice president with CB Richard Ellis in Ft. Lauderdale. The campus simply doesn't offer the kind of near-term upside potential that expert asset management might generate at multitenant properties with staggered lease expirations, he added.

Indeed acquiring a property net leased to a creditworthy corporate tenant is more akin to buying a bond, as the tenant is responsible for maintaining the facility and paying for utilities and property taxes. The KanAm fund's responsibilities don't range far beyond collecting the rent, as long as the tenant remains current on its obligations.

And AmEx isn't a likely candidate for default â€" although its share price did hit a 52-week low of $41.15 on Jan. 22â€"amid concerns about consumer spending ahead and a dramatically volatile period on Wall Street.

Adams described the Plantation complex as a "B-plus" project, in a solid A suburban location, not far off I-595, a key transit route.

While total occupied Broward County office space actually shrank a bit last year, absorption was positive in the 2.8 million-square-foot Plantation submarket, where the vacancy rate is at 9.5 percent, according to CB Richard Ellis.

"Pension-fund advisors and other deep-pocketed, lower-leverage buyers have tended to drive South Florida's office investment activity," Adams noted. "They're attracted to long-term supply restrictions, including the paucity of developable land and relatively restrictive municipal development codes," he added.