APF Properties acquired 2200 West Loop South in Houston for approximately $37 million in August 2013 for approximately $37 million. The 200,000 square-foot Class A office building is in the best location of the very desirable Galleria submarket, and sits on 4.2 acres with ample landscaping. The land alone had a market value of about 90% of the total purchase price making this an unbelievable opportunity. The asset was 98% leased and had a 8.3% going in cap rate. Future rent growth was assured with half of the leases at 45% below 2013 market rates and over 75% of its leases set to expire by the end of 2017.
APF Properties partnered with an institutional provider of a mezzanine loan to acquire this unbelievable value play. APF Properties’ investment thesis for the property was right on target. Only one year after the acquisition, the firm sold the property for approximately $47 million to the building’s main office tenant, Tenaris, a leading energy sector supplier. In the process, the firm earned a 60% return on its equity investment.