Urban Renaissance Group, a real estate owner and manager led by a former Equity Office Properties Trust executive, got a $50 million pledge for investments and $150 million of assets from Joshua Green Corp. in a deal that gives the family-owned company a majority stake.
“This dramatically changes our asset base and our balance sheet, which is always a positive thing in the real estate business,” said Patrick Callahan, chief executive officer of Urban Renaissance, who founded the Seattle-based company in 2006 after 15 years at Equity Office. He was Northwest regional manager at the Chicago-based company, the largest U.S. office landlord until Blackstone Group LP (BX:US) bought it in 2007.
The investment by Seattle-based Joshua Green will enable Urban Renaissance to buy real estate in cities including Seattle, Denver, San Francisco and Portland, Oregon, Callahan said in a telephone interview. Joshua Green is the owner of the landmark downtown building that bears its name, which is included in the deal.
Urban Renaissance’s expansion comes as prices for top-tier office buildings in West Coast markets such as Seattle and San Francisco jump, propelled by investor appetite for higher- yielding investments with interest rates at record lows. The company invests in office buildings, retail centers and mixed- use properties.
“There has been a lot of activity in really the Class A ‘core’ assets -- the highly stabilized assets,” Callahan said. “There’s a large range of market opportunities. Those that are more value-add are less robustly priced.” Value-add properties are those that require work such as fixing up lobbies or filling vacancies to increase cash flow.
Buildings in suburban markets may present opportunities for Urban Renaissance, Callahan said. Many investors shunned suburbs following the credit crisis, favoring central business districts that they believed to be less risky.
The company plans to invest the $50 million in partnership with institutions such as private-equity funds, Callahan said. Urban Renaissance may put in 5 percent or 10 percent of the equity in a deal, with a partner contributing the rest, then borrow an amount similar to the equity, he said.
Urban Renaissance ultimately may acquire $1 billion of properties, Callahan said. The company will consider assets from as small as 70,000 square feet (6,500 square meters) to “big high-rises,” he said. It may buy a real estate operating company as well as individual assets.
The real estate from Joshua Green increases Urban Renaissance’s holdings to 6.5 million square feet from 6 million, the companies said. Joshua Green owns shopping centers and office buildings in the Seattle area and Spokane, Washington.
“We owned real estate asset by asset” in the past, said Stan McCammon, president and CEO of Joshua Green. “We think the better expertise is investing in people.”
Real estate represents a minority of Joshua Green’s holdings, McCammon said. Its other investments include stakes in companies that make fly-fishing gear.
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