Brooklyn Park, MN

Realized Deal : Quadrant Office Building

Sponsored By Hempel Companies

Risk Profile
Value-Add
Amount Invested
$2,525,000
Targeted IRR
27.1%
Actual IRR*
30.1%
Targeted Equity Multiple
2.0x
Actual Equity Multiple*
1.61x
Targeted Hold Period
3.0 years
Actual Hold Period
1.9 years

In October 2017, Hempel Companies launched a recapitalization offering for a 103,387 square foot office building located in the desirable Twin Cities suburb of Brooklyn Park, Minnesota. 

Hempel originally acquired the property as a distressed asset in 2014 alongside a joint venture partner. After making the intended capital improvements and bringing the building to stabilization, the joint venture partner elected to sell its interest in the property. Having owned, managed, and leased the property, Hempel believed in the quality and additional upside of the asset and wished to retain it, thus prompting the recapitalization.

The business plan included rolling below-market lease rates to targeted market rates, maintaining 90% or greater occupancy, and selling the asset after three years.

Project Timeline

Strong Leasing Momentum Early On

December 2017

After closing the transaction in October, Hempel immediately signed two leases for a total of 7,933 square feet, renewed another lease for 2,747 square feet, and had one tenant vacate their space. As of December 2017, the building was approximately 94% leased.

Building Officially 100% Leased

September 2019

Speculative finishes added in Q1 2018 to the remaining vacant space provided the competitive advantage to successfully secure a new three-year lease in the beginning of Q2 2018, which helped the building reach 100% capacity. Going forward, Hempel planned to focus on renewing existing tenants and increasing financial efficiency through increased rental rates and reduced expenses.

Early Exit

September 2019

From Q2 2018 onwards, the property outperformed projections and was predominantly 100% leased, which prompted Hempel to explore an early sale of the building. The property was listed for sale in Q1 2019 and it was officially sold in September 2019.

Final Outcome

Favorable market conditions, strong leasing momentum, and successful business plan execution created the opportunity for Hempel Companies to exit the investment approximately one year earlier than planned and achieve a higher-than-projected IRR for investors due, in part, to the early exit. 

*Net of fees.

This report contains explanations of a series of events associated with Henley Companies’ Quadrant Office Building offering that resulted in an approximate 58% (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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