Duke-Weeks scouts $60 million buyer
Nashville Business Journal - by Philip Nannie Nashville Business Journal
Commercial real estate experts call it "capital recycling." Everyone else refers to it as a big deal.
Indianapolis, Ind.-based based Duke-Weeks Realty Corp. (NYSE: DRE) has hired Grubb & Ellis/Centennial to market $60 million worth of office/industrial properties in Nashville. The buildings include Haywood Oaks, Greenbriar Business Center and Royal Parkway I & II.
Grubb & Ellis, chosen over several other competitors, including some with a national presence, has 90 days to get the property under contract.
"Several leading firms were looked at," says John W. Nelley Jr., managing director of the Nashville operations for Duke-Weeks. "It was a difficult choice."
Nelley adds that he thought Grubb & Ellis would do a good job marketing the property given their substantial experience leasing this product type.
Specifically, Duke-Weeks was impressed with the expertise of Barry Smith and David Huddleston and their team members. Smith's expertise is in office leasing, which is one of the most important reasons a buyer would purchase office/industrial property of this type according to Nelley, and Huddleston who is an expert in the sale of large investment properties. Their synergy creates an impressive marketing and sales team that hopefully will result in a contract placement within 90 days.
"Within 90 days we will know what the future holds," says Huddleston. "We've been getting good interest and have had many calls come in particularly from the Northeast."
Smith had worked with Duke-Weeks in the past as a tenant representative and had brought several clients to their buildings. He says the buyer of these office/industrial properties will want to know their leasing potential and will need to feel comfortable they can lease the property when needed.
"This is a big component in the buying decision," says Smith.
Setting values
Duke-Weeks is a real estate investment trust and like most REIT's will periodically engage in this capital recycling process, says Nelley.
"These type of sales help reposition the product type in the market," says Nelley. "We want and need to diversify."
Nelley says Duke-Weeks has more than 1 million feet of this type of real estate and refers to it as service center/flex building product. Other types include Type 2 products, which are an office/industrial combination with less office space and more industrial, and Type 3 products, which is even less office space and more industrial warehouse space. Nelley says Type 3 products are actually just bulk warehouse buildings.
Duke-Weeks will not be the only benefactor of the sale of these office/industrial properties. Nelley says this sale will create a "cap rate" in the market. Cap rate means market value and Nelley says that value has not been set recently in the Nashville area.
"It's like having comps in your neighborhood for a home sale," he says. "If no houses had been sold on your block you would have a difficult time placing a value on it."
After the sale, other owners of office/industrial space in town will benefit knowing what the market will bear for their properties.
When asked if no buyers for their properties are found within the 90-day window, Nelley says they will either keep the properties or put them back on the market at a different time.
"Based on the response we've had so far, we feel optimistic," says Huddleston.
REACH NANNIE at pnannie@bizjournals.com or 615-248-2222, ext.109.
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