Easterly Government Acquires Raleigh-Area Office Campus
Easterly Government Properties, a REIT specializing in developing and holding properties leased to the U.S. government and a few other entities, has acquired a three-building office campus in Cary, N.C., a part of metro Raleigh-Durham, for an unspecified price. The seller was Newport Beach, Calif.-based Menlo Equities.
Collectively, the property is known as Crossroads Corporate Park, including Building I (79,100 square feet), Building II (98,400 square feet) and Building III (121,500 square feet). The properties, all of 1990s vintage, are 97 percent leased, with the Wake County Public School System taking a vast majority of the space.
The school system first occupied the buildings in 2011 under a lease that does not expire until 2034, and which includes annual rent escalations. About a third of Building III is leased to Jacobs Engineering, and a small percentage of that building is vacant (the other two are fully occupied by the school system).
The buildings’ occupancy is thus much higher than the average of office buildings in the area. Occupancy in the area averages 77.9 percent, and new leases coming within six months of expiring leases in the area pull in 1.5 percent less rent, according to CommercialEdge data.
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Menlo Equities acquired the three buildings in 2018, the same source indicates. Loans for each building, all held by PNC Bank, reached their maturity around the time of the most recent sale.
The buildings are low-rise, two stories each. Amenities include tenant in-suite restrooms and redundant power. The school district uses them both as operational headquarters and public-facing service centers with roughly 1,200 parking spaces.
Easterly in acquisition mode
Washington, D.C.-based Easterly has been an active buyer of government-leased assets this year, inking such deals in the third quarter as the August acquisition of a 193,100-square-foot outpatient facility leased to the Department of Veterans Affairs in Jacksonville, Fla. It was the final property to be acquired in a 10-property portfolio, all of which are fully leased to the VA.
In September, the company acquired Northrop Grumman-Dayton, a facility that has been occupied by Northrop Grumman Systems Corp. since 2012 and which incorporates robust security enhancements, such as secure design standards, access control systems and security cameras. The property is adjacent to Wright Patterson Air Force Base in Ohio and its Air Force Research Laboratory headquarters, as well as the Air Force Institute of Technology.
By the end of the third quarter, the REIT solely, or as part of a joint venture, owned 95 properties in the U.S. encompassing about 9.3 million square feet, according to SEC filings. Easterly maintains a proprietary database that tracks about 8,500 leases totaling roughly 200 million square feet and includes substantially every major U.S. government-leased property that meets the company’s investment criteria. The database also includes information about the ownership of such properties.
In October, the company acquired a 104,136-square-foot facility, also leased to Northrop Grumman, in Aurora, Colo., immediately west of Buckley Space Force Base. About 70 percent of the three-floor buildout is under secure design standards. Buckley SFB provides strategic and theater missile warning to the U.S. and its allies.
Easterly’s holdings feature a long list of tenants, including the aforementioned VA and Northrop Grumman, but also the FBI, IRS, EPA, FEMA, FDA, DEA, Department of Transportation, Department of Justice, Social Security Administration, U.S. Citizenship and Immigration Services, as well as Immigration and Customs Enforcement, among others.
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