90 North JV Picks Up Trophy Tower in Raleigh

A JV of two foreign companies is giving the sellers a tidy profit on a Raleigh corporate campus it grabbed.
90 North Real Estate Partners Daniel T  Cooper - 2

Daniel Cooper, 90 North RE Partners

A joint venture of 90 North Real Estate Partners and Dubai-based Arzan Wealth has picked up a 485,000-square-foot corporate campus in North Carolina’s Research Triangle Park from Rubenstein Partners and Grubb Properties for $127 million, giving the sellers a tidy profit after buying the site for about $26 million less than two years ago.

It is the third acquisition – and the largest – made by United Kingdom-based 90 North Real Estate Partners since it launched its North American operations last fall. The London investment firm said in October it had at least $750 million to spend over the next 18 to 24 months in North America. Since setting up shop in Chicago, it has now spent more than $200 million and acquired more than 1 million square feet of commercial real estate, including The Reserve at Deer Park, a 351,425-square-foot Class A office building in suburban Chicago. The firm also has a long-standing, strategic partnership with Arzan Wealth, acquiring over $500 million in assets around the globe and acting as advisors to a consortium of UK- and Middle East-based investors.

“This is a great acquisition for 90 North, one that really speaks to our commitment to investing in prime, trophy-caliber assts in North America,” Daniel Cooper, partner & head of the firm’s North American operations, said in a news release.

One reason why the JV was attracted to the purchase was that fact that Rubenstein and Grubb had signed global PC manufacturer Lenovo to a long-term lease of the entire campus. The acquisition includes a nearly 40,000-square-foot building that is being built as a research and development center for Lenovo. The site can also accommodate an additional 100,000 square feet of development.

“The Lenovo Enterprise Campus has the stability and guarantee of a Fortune 500 company and the upside potential of the additional space being developed, and available to be developed, all within a prestigious research park environment,” Cooper added.

Cooper told Commercial Property Executive 90 North’s strategy “starting out in the U.S. is to buy core plus or value add and then grow into core.” Noting that the group “went against some heavy hitters” to acquire the Raleigh property, he described it as core plus.

While 90 North’s first three U.S. acquisitions have all been office properties, Cooper said he is looking at deals in California, Texas, Florida and Illinois that include industrial, student housing and medical assets. Other than hospitality and retail, he said they are open to different property types and locations. While he considers $75 million the sweet spot for North American investments, Cooper said the firm’s new office in Malaysia will add more equity and give it more leeway when going after deals bigger than $100 million.

The North Carolina transaction was brokered by Cushman & Wakefield with David Meline and Samir Idris in the Atlanta office representing the sellers. Local support also came from Scot Humphrey and Chris Norvell of Cushman & Wakefield | Thalhimer in Raleigh, N.C.

For Rubenstein and Grubb, it was a value-add investment they turned around quickly. The property was vacant when the joint venture acquired it in December 2013. Four months later, Rubenstein and Grubb secured a long-term, triple-net lease with Lenovo which had just acquired IBM’s x86 server division for $2.3 billion and needed a large, high-quality space at a competitive price quickly.

David Rubenstein

David Rubenstein, Rubenstein Partners

“Despite the perceived risk of acquiring vacant suburban assets, there are ways to be successful in this segment,” David Rubenstein, founder & senior managing partner of Philadelphia-based Rubenstein Partners, said in the release. “If you thoughtfully analyze the metro region, choose the right submarkets and properties, and position yourself to deliver value to the tenants in the form of quality space for a compelling rental rate due to your acquisition basis, you can capture demand from major users and add tremendous value.”

The Wall Street Journal reported that Rubenstein and Grubb invested an additional $52 million to upgrade the property for Lenovo and add the 40,000-square-foot building, but the joint venture still walks away with about $50 million in profit.

“We took a more nuanced view of the submarket than some investors, which led us to a more optimistic view about the fundamentals of supply and demand in the Research Triangle Park,” Dan Doyon, Rubenstein’s director of acquisition & regional director for North Carolina and Florida, said in the release. “That investment thesis played out very quickly – much more quickly than we ever expected.”