BPG finds huge return on Newark-area office park
NEWARK – Prolific Delaware investment firm and developer Buccini/Pollin Group (BPG) sold the last of its holdings in the Christiana Corporate Center in April, producing an estimated return on investment of more than 600% in five years.
While BPG is perhaps known best for its investments in residential units, hotels, and restaurants in downtown Wilmington, it also holds a sizable portfolio of office buildings in New Castle County. BPG acquired the Christiana Corporate Center, located off Salem Church Road southeast of Newark, in April 2015 as part of a $50.75 million deal with Philadelphia-based Brandywine Realty Trust that also sold the Delaware Corporate Center, located off U.S. Route 202 north of Wilmington.
At the time, the Christiana office park was suffering from a 154,000-square-foot vacancy at 400 Commerce Drive, after Computer Sciences Corp. left the building. According to county land record estimates, BPG acquired the entire 31-acre property with three office buildings for just over $6 million.
“The way we looked at it was, ‘OK, if we can acquire all five buildings and then look at a staged exit of the Christiana Corporate Center properties, then the sum of the parts is greater than the whole,’” recalled Michael Turick, senior vice president of asset management for BPG.
BPG settled on a five-year plan, backed by investor capital, to flip the value-add property. It accomplished its goal almost five years to the day, selling the three buildings in separate deals.
Old Town Hall Associates, a limited liability corporation managed by Elsmere lawyers Robert Pasquale, Eric Doroshow and Shakuntla Bhaya, closed an estimated $5.1 million deal April 30, buying the 64,000-square-foot office building at 100 Commerce Drive, according to county land records.
Current tenants include a mix of engineering firms like Mesa Associates and Power Delivery Solutions, health care providers like St. Francis Hospital and Vitas Healthcare Center, and business service firms like Turnkey Risk Solutions. According to online leasing materials from real estate firm CBRE, about 11,000 square feet is currently vacant.
In August 2019, BPG closed an estimated $24 million deal with an affiliate of London-based investment firm Trinova Real Estate LLP for 400 Commerce Drive, which is home to Comcast’s state-of-the-art call center. It was Trinova’s first investment in the United States.
In 2016, BPG sold 200 Commerce Drive, home to AAA Mid-Atlantic’s network operations center, for an estimated $15.5 million to Chicago-based real estate investment firm Oak Street Real Estate Capital. (Oak Street flipped its investment a year later to Atlanta-based WIM Net Lease Acquisitions for an estimated $17.2 million)
Across the three deals, BPG made an estimated $44.6 million for a return on its initial investment of about 640%.
Turick noted that much of that value could be directly tied to securing Comcast as a long-term tenant at 400 Commerce Drive. The telecommunications giant signed a 10-year lease at the property in 2018 and opened the facility last year, although Turick noted that BPG had to invest a significant amount of capital into the building’s renovation to get Comcast to sign on.
It almost didn’t come to fruition though, as Turick said that BPG had originally negotiated the space with Prosper Marketplace, a San Francisco-based peer-to-peer lending company. Prosper ultimately scrapped its plans to open a Delaware office, however, and it led BPG officials back to the drawing board.
At the top of the list was Comcast, which had been seeking an opportunity to consolidate its two Delaware customer service call centers. Turick said that BPG had been tracking the company as a target for nearly two years before they were able to bring Christiana Corporate Center to them as a possibility.
“Big companies move like battleships; it takes a bit of time,” he noted.
With its stake in Christiana Corporate Center now completely divested, Turick said that BPG was looking for more opportunities to invest into sizable properties in New Castle County. With the coronavirus leading to uncertainty in the future commercial real estate market, many top investment firms are putting together capital funds in preparation of opportunities, and Turick said that BPG was among those hunting.
“I think strategically for us we want something that’s going to be complementary to our portfolio but not necessarily competing with our current properties,” he said. “Distress certainly provides opportunity.”
By Jacob Owens