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March 15, 2020

Augusta professional building sells for $8.7 million

Courtesy / The Boulos Co. 442 Civic Center Drive in Augusta drew more than 40 queries and pulled a $8.7 million price.
By Laurie Schreiber

Although the initial list price for a turnkey investment property in Augusta was dropped by $1 million, the ultimate $8.7 million deal shows active interest by both Maine-based and out-of-state investors.

442 LLC bought 442 Civic Center Drive from Rime Group PTL LLC. Chris Paszyc and Noah Stebbins of Boulos Co. brokered the deal, which closed March 9.

The property comprises a 57,383-square-foot office building built in 2002 on 13.4 acres. The building last sold in 2012 for $2 million.

Marketed as a Class A multi-tenanted office investment, the building is 99.3% leased to state and federal government offices, government contractors and Maine General Medical Center, and enjoys historically high occupancy levels, according to the Boulos brochure.

It houses over 250 employees and parking for 335 vehicles. It’s less than 10 minutes from the State Capitol and five minutes from the Maine Turnpike. Upside includes stable cash flow from long-term tenants, scheduled rent increases and a buildable pad site at the entrance directly on Civic Center Drive. 

Dramatic uptick

The building is anchored by the Maine Workers Compensation Board and Maine General Medical Center, said Paszyc, who represented the seller.

Marketing began a year ago at $9.75 million. The price was subsequently dropped to $8.9 million, which drew “a dramatic uptick in interest and offers,” he said. “We had over 40 registered buyers who completed confidentiality agreements interested in the property, with a mix of Maine investors and out-of-state buyers. Out-of-state buyers were primarily East Coast. However, we had interest from all over the country,” including the West Coast and Midwest.

The seller was a partnership of three entities, he added.

The structure was originally built for the Maine Department of Health and Human Services in 2002, said Paszyc. It was purchased by an out-of-state investor in 2007 as an investment, with a calculated risk that the state would renew its lease in 2012.

However, under the LePage administration, the state decided not to renew its lease in 2012, and the investor lost the building to the lender through foreclosure, he continued.

The property subsequently went up for auction, which is when Rime Group PTL LLC bought it for $2 million, with a plan to re-tenant it as a multi-tenanted office building.

The building is in a great location off Exit 112 on Civic Center Drive with excellent parking, Paszyc said. 

“We had great success attracting tenants,” he added.

Long-term tenants include the state of Maine, Maine General Medical Center, Summit Natural Gas, Bankers Life Insurance, U.S. Army Corps of Engineers, Fedcap and Transworld Systems.

Stable investment

The people behind 442 LLC are Joe and Ashley Mannisto, local investors who own a variety of buildings throughout Maine.  

“We have about a dozen properties in Maine,” said Joe Mannisto, who owns the Augusta franchise of a water purification company called Aerus and splits his time between the franchise and real estate investment.

The Augusta property drew his attention as a stable investment with long-term tenants, with potential to build out the pad site, he said. Plans include listing the pad with Paszyc as a build-to-suit opportunity, he added.

The purchase was primarily financed through a loan from Camden National Bank, he said.

His overall portfolio comprises mostly properties in Maine and as far as Nashville, Tenn., he said.

“I’ve been buying one or two properties per year for 20 years,”  he said. “I used to have a bunch of residential apartment buildings. For the most part, I’ve sold the residential properties and we stick with commercial now. There’s better return and there’s less management involved.”

Nearby $19.78M deal

Less than half a mile north, Paszyc brokered a $19.78 million deal last September, at 51 Commerce Drive in Augusta. The 105,500-square-foot office building is occupied by the State of Maine Department of Revenue Services and Office of Information Technology.

The buyer was an out-of-state investment fund that had originally called Paszyc about  the 442 Civic Center Drive marketing.  

Courtesy / The Boulos Co.
51 Commerce Drive was unlisted but resulted in a $19.78 million deal last September.

Instead, he steered them to 51 Commerce Drive. Although it wasn’t on the market, he called the property’s owners to see if they’d consider selling.  

“One thing led to another, and within a couple weeks we had a deal,” he said.

Now he’s listed the building next door for $24 million. Located at 45 Commerce Drive and called the Central Maine Commerce Center, it’s a 311,000-square-foot multi-tenanted office building. A couple of offers have come in so far, but no deal has been made yet, he said.

Robust activity

Courtesy / The Boulos Co.
The Central Maine Commerce Center at 45 Commerce Drive is listed for $24 million and has drawn a couple of offers in the robust Augusta market.

The transactions represent a robust market in Augusta.

“Traditionally, Maine has been a stable market, somewhat resistant to the volatility the rest of the country experiences. Central Maine even more so,” he said. “Provided the real estate fundamentals of the properties we market meet the demands of the investment community with regard to tenant credit, length of lease term, quality and location of the real estate, and there is capital available, I expect the high demand for these types of investment to continue.”

Pricing trends for investment properties are a function of lease rate, lease term, credit of the tenant, cost of capital and the underlying real estate, he explained.

“Overall, given the increased cost of construction locally and nationally, we have seen a rise in lease rates over the past decade,” he said. “Coupled with the decreased cost of capital, low supply of quality investment properties and high demand, this has precipitated an overall rise in the cost of investment real estate.”

Paszyc predicted increased availability of investment products than in previous years, which will meet increased demand.  

“I expect robust activity in early 2020 as several new investment properties are coming to market to capitalize on late-cycle market dynamics,” he said. 

Asked about potential impact on the real estate market of COVID-19 and the stock market crash, Paszyc said it’s hard to predict. 

“However, I expect demand for government and medical space will continue through the crisis,” he said.

 

 

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