SpringPort Building

Investment Summary
Investor’s IRR: 30.01%
Initial Equity: $3.05M
Acquisition Price $7.225M (February 2004)
Disposition Price: $9M (September 2005)
Hold Time: 20 Months (1 ¾ years)
CAP Rate at Purchase: 9.56% (82% occupied)
CAP Rate at Sale: 8.61% (100% occupied)

In early February of 2004, we acquired the SpringPort property for $7.225M with a group of local investors on an equity raise of $3.05M. The 67,500 square foot multi-story office building (located in Colorado Springs near the Colorado Springs Municipal Airport and Peterson Air Force Base) was purchased with an 82% occupancy rate, which allowed for upside upon full stabilization. Two long-term, credit tenants occupied the property at the time of closing (Lockheed Martin and the US Government) with three to five year lease obligations. The initial strategy was to lease the remaining 18% vacancy, increase the lease rates upon renewal and hold the asset long-term (while distributing a healthy return to the investors for 8 to 10 years). Within six months of closing on the property, Lockheed Martin elected to lease the balance of the building and slightly extend their term enabling us to provide the investors with regular distributions immediately upon stabilization. Late in the summer of 2005, a national REIT named Corporate Office Properties Trust (which is one of the largest government occupied building owners in the country and was making a strong push into the Colorado Springs market due to the presence of major defense contractors) approached us and inquired if we’d be interested in selling the asset. Since our investment objective was for a long term hold, we presented them with an unrealistically high price that could justify our early exit from this investment as well as to provide them with a healthy return for the risk of this investment. Unexpectedly they agreed to our price and we ended up selling the building only 20 months into the investment (with 100% consent from the investors).