Case Study #3

Elliot Corporate Center, Tempe, AZ

Acquired December 2001. Sold October, 2004.

Elliot Corporate Center (“ECC”) was acquired in our investment fund December, 2001. ECC is a 224,000 square foot Class A back office building located in Tempe, Arizona. The original developer completed and delivered the building in 2000. During this period, speculative office development was burgeoning throughout the Phoenix market. The seller’s leasing efforts stalled short of stabilization and continued financing become problematic. ECC was 78% leased when we placed the asset under purchase contract and was in need of a complete repositioning strategy. With new capital and aggressive management, we implemented a full range of renovation, construction, cosmetic and landscaping modifications, as well as a new leasing program. ECC is well-located and the purchase price was below replacement cost. The purchase was closed December 2001, during the aftermath of the September 11, 2001 World Trade Center attacks.

The purchase price of Elliot was $22.6 million or $101 per square foot, including reserves for renovation and leasing. During its period of ownership, ECC’s 96% occupancy outperformed the average for the sub-market by almost 20%. In October, 2004 the property was sold for $29.4 million or $131.25 per square foot. Despite having low leverage at 65% of cost, over the period of ownership gross distributions produced an IRR on this investment of greater than 30%.