Adler Fund, Kawa Buy 467 KSF Portfolio in Houston

A joint venture between the Adler Real Estate Fund and Kawa Capital Management has purchased five parks in Houston totaling 16 buildings and 467,000 square feet of office, industrial and flex space.

By Scott Baltic, Contributing Editor

A joint venture between the Adler Real Estate Fund, of Miami, and Kawa Capital Management, of Miami Beach, Fla., has purchased five parks in Houston totaling 16 buildings and 467,000 square feet of office, industrial and flex space, the companies announced Tuesday.

The five parks, all in Houston proper and ranging across the North, Northwest and Southwest submarkets, are Plaza Southwest, at 152,173 square feet; Crescent Ten, at 98,008 square feet; Commerce Park North, at 97,332 square feet; Technipark Ten, at 71,673 square feet; and Westchase Park, at 47,816 square feet.

The portfolio is 96 percent occupied by more than 85 tenants, including Exxon Mobil, Samsung, Ryder, Schlumberger and Alford Services.

The transaction’s cap rate is over 9, Adler Group president and chief investment officer Matthew L. Adler told Commercial Property Executive. A source who’s familiar with the sale estimated its value at between $23 million and $30 million.

The portfolio’s seller was a joint venture between Insite Commercial Real Estate and Carval. Rusty Tamlyn and Trent Agnew of HFF represented the seller.

This is the second recent Houston-area purchase by the fund, a closed-end discretionary fund managed by Adler Group. In August 2011, the fund bought the 177,000-square-foot Westchase Corporate Park. Houston is now Adler Group’s third-largest market, following Washington, D.C., and South Florida.

The Adler Group has been targeting Houston for a long time, Matthew Adler told CPE. We really like the economic drivers, he said, especially the transportation access by way of George Bush Intercontinental Airport and the Port of Houston (the nation’s fourth-largest), the energy sector, and the city’s rapid population and job growth. Population growth is a really important thing for us.

The high average occupancy rate across the five parks suggests little room for improvement, but Adler emphasized that tenant retention is top priority in anything the company buys.

He acknowledged that the fund’s initial $20 million in capital doesn’t necessarily sound like much, but noted that in six of its seven acquisitions over the past two years, the fund has had a co-investment partner.

Adler Group focuses geographically on the nation’s southeastern quadrant and currently holds properties from Miami north to Baltimore and from Miami west to Texas. The company has been looking at North Carolina, Virginia, Dallas and Austin, Adler said, hinting that it might be returning to Atlanta, were it formerly had a substantial presence.

Functionally, Adler said, the company focuses on management-intensive multitenant industrial and office properties. And finally, he noted, the company is getting set to launch their next fund.