Origin Investments, a Chicago real-estate investment firm, has snapped up a four-story Raleigh office building for $23.5 million and will seek to raise tenants’ rates by up to 25 percent as part of its investment strategy.
The largest tenant of the Trinity Place office on Edwards Mill Road is communications and marketing firm Capstrat, followed by IT staffing firm TEKSystems, which plans to move out by mid-2017. Origin said in its release that Trinity Place tenants are paying between 15 and 25 percent below market rates.
“If we’re at a fair market rate, the tenants will stay” and pay higher rental fees, said Thomas Briney, Origin’s vice president for acquisitions. “It is a negotiation between are you really going to leave and pay the cost to relocate?”
The 114,547-square foot office has six tenants currently.
“That’s why we like it so much,” Briney said. “Without having to do anything we’ll generate a real attractive cash yield.”
Origin bought Trinity Place from Brookdale Group, a real estate investment firm in Atlanta. The purchase price was $205 a foot, which is relatively expensive for the market, Briney said, and based on the fact that the office is 100 percent occupied and in a good location.
The office has had an average occupancy rate of 97 percent since 2003.
“It’s perfectly aligned between the decision makers’ homes and their workers’ homes,” Briney said. “It’s a location which is spread nicely between the decision maker and the worker bees.”
Trinity Place is Origin’s second acquisition in the Triangle in the past 18 months. In February 2015, Origin acquired 2605 Meridian Parkway, a two-story office park in Durham near Research Triangle Park, for $7.8 million.
That acquisition was for $105 a square foot, which was below market value, in part because a large tenant was moving out and leaving half the 73,466-square foot building unoccupied, Briney said.
Origin was founded in 2007, has an office in Charlotte, and acquires properties in eight markets.
Real estate investment funds typically invest in properties for five to seven years and then sell the properties at a profit for investors. Briney said Origin expects to sell Trinity Place within the next decade.