• Instead of a sale upon completion, Angelic structured a
forward purchase contract that was signed six months prior
to completion of the building and 18 months prior to full rent
commencement and the closing.
• The forward purchase pricing cap rate premium as structured
was less than the cost of escrowing the replacement rent
during the time the tenant had full rent relief. This resulted in
significantly higher net total proceeds to the developer than
closing a year earlier and having to escrow the free rent by
arbitraging the much lower cost of extending the developer’s
construction loan during that time instead.
• The developer also enjoyed the ability to classify the sale as
a long term capital gain at the time of closing, rather than a
short-term capital gain at higher tax rates.
• This transaction was one of the largest institutional buyer
contracts for purchase signed in 2013 in the Detroit metro
area. Institutional buyers were very leery of that market during
this time. Angelic identified a buyer willing to objectively look
at the market’s trajectory and realize that its past struggles
were behind it. This was for a sub-investment grade tenant
which is primarily a consumer automotive parts supplier.
• Angelic now has another large transaction under contract
with this developer on a future build-to-suit delivery that was
far more complicated for tax structuring purposes than this
transaction. The relationship that this transaction helped build
between Angelic, the developer client, and the buyer was key
to solving the complications that the next transaction entailed.
GABRIEL SILVERSTEIN, SIOR
ANGELIC REAL ESTATE
NEW YORK, N. Y.
TRANSACTION TYPE & DETAILS
TRANSACTION DATE: MARCH 10, 2015
TRANSACTION TYPE: INVESTMENT SALE
BUILDING TYPE: OFFICE + R&D
BUILDING SIZE: 278,000 SQ. FT.
SALE PRICE: $40,025,000
This was Angelic Real Estate’s first transaction with this developer, a developer who had historically developed
primarily for its own account but who didn’t want to maintain
the exposure of a large single project with one tenant.
• The developer wanted to achieve favorable long term capital
gains treatment on the property sale.
• The developer also did not want to have its sale price punitively
discounted because of a significant free rent that the tenant was
to receive at the onset of the transaction.
• Escrowing the free rent value at an earlier closing would have
forced the developer to “pay” the carry cost of that replacement
income to the purchaser at the same interest rate as the cap rate
for the transaction, which Angelic wanted to avoid.