Dallas, TX

Realized Deal : Northgate Business Park III

Sponsored By Avistone

Risk Profile
Core-Plus
Amount Invested
$125,000
Targeted IRR
13.2%
Actual IRR*
16.6%
Targeted Equity Multiple
1.76x
Actual Equity Multiple*
1.55x
Targeted Hold Period
5.0 years
Actual Hold Period
3.0 years

In February 2017, Avistone launched an offering for a 94% leased, 155,494 square foot office/flex business park located in the Northeast Dallas/Plano Road submarket. The execution risk had been eliminated as Avistone had acquired the property in early January by leveraging its direct relationship with the seller to secure the property at less than the highest bid. This represented the third transaction with the seller and Avistone’s business plan contemplated executing the same core-plus strategy as with the previous two deals. The primary objectives were to operate the property efficiently, distribute cash flow, and create value by increasing rents upon tenant rollover to take full advantage of Dallas’ strong industrial market. Avistone believed that this acquisition represented an excellent opportunity to invest in a stabilized, multi-tenant asset at well below replacement cost in a tight market. With leasing risk spread among 33 tenants, the property offered in-place cash flow, as well as value-creation/capital appreciation via projected increased rental income and net income. During an anticipated three to five year holding period, the property was projected to provide an attractive risk-return ratio, and a mix of current yield with strong internal rate of return upon sale.

Project Timeline

Smooth Transition

March 2021

Avistone reported a smooth transition at acquisition. It had renewed four tenants representing 11,160 square feet, all at net effective rates above underwriting and with no tenant improvement costs. In addition, three new leases had been executed since acquisition totaling 14,826 square feet with initial rental rates of $5.20 PSF NNN and above, along with minimal tenant improvement costs. At the end of Q1 2017, the property was 98.4% occupied, an increase from 93.9% at acquisition in January.

Sale

March 2021

Throughout 2018 and 2019, the property retained high occupancy and performance remained stable, with Avistone able to renew and quickly backfill vacant spaces at increased rents. Although Avistone was not in the market to sell the property, an opportunistic exit scenario presented itself and Avistone decided to sell the asset as part of a larger portfolio sale. The sale transaction was officially completed in March 2020.

Property Improvements Complete

December 2021

Avistone’s underwriting called for $243,000 to address deferred maintenance consisting of landscaping, concrete repairs, painting, signage, and some roof work. As of Q4 2017, all of the work was completed and under budget, leaving the property in good condition. Additionally, Avistone was bidding out improvements for a 2,600 square foot space that had been vacant for several years. This work would include creating usable warehouse space and installing a roll-up door, as well as new paint and flooring.

Final Outcome

Good business plan execution and favorable market conditions led to an opportunistic exit opportunity which allowed Avistone to achieve strong returns for investors, including a higher-than-projected IRR.

*Net of fees

This report contains explanations of a series of events associated with Avistone’s Northgate Business Park III offering that resulted in an approximate 55% (net of fees) absolute return on original equity to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not.

The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.

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