History in the Market – Milton Fine and Interstate Hotels Corporation (IHC) developed, owned and managed the Syracuse Marriott. Adjacent to the hotel was the Carrier Parkway Office Building and originally IHC was interested in purchasing the building for a hotel expansion to include an additional conference facility. The conversion of the building to a hotel was cost prohibitive for IHC, but given the merits of this investment, the building was purchased and operated as commercial office space.
Opportunities
This 94,500 square feet Class A office building situated on 9.7 acres was previously owned by the Carrier Corporation. Early in 1997, Icon International (a corporate barter company) entered into a barter sale arrangement with Carrier Corporation for $5 million in trade value. A subsidiary of FFC Capital negotiated the purchase of the building in the fourth quarter of 1997 for $2.4 million. At less than $26 per square feet, the purchase price was well below market. The building was vacated by Carrier Corporation and in need of major renovations.
Performance
With a $2.1 million investment in tenant improvements and renovations, FFC Capital leased the entire building within six months from the date of purchase. Although the Syracuse/Dewitt, New York office market was producing vacancy rates of 20% downtown and 10% in suburban areas, with the entire building leased to CNA Insurance and Telergy Inc., FFC Capital was able to maintain 100% occupancy. The building was later renamed to The Telergy Office Building, and given the product quality and location as well as Telergy's need of additional office space, Telergy Inc. was interested in acquiring the building. In December 1998, FFC Capital entered into a like kind exchange agreement with Telergy Inc. for the entire building for $7.5 million in value, exchanging the building for fee interest in the Pittsburgh Residence Inn by Marriott located in Pittsburgh, Pensylvania as well as the Westborough Courtyard by Marriott located in Westborough, Massachusetts. In a one year period, FFC Capital purchased, leased and sold the building realizing an internal rate of return of 125.0%.
Facts
4th Quarter 1997
Building purchased for $2.4 million
1st and 2nd Quarter 1998
Invested $2.1 million in renovations and tenant improvements
2nd Quarter 1998
Leased 100% of the building to two major tenants, CNA Insurance and Telergy Inc.
4th Quarter 1998
Like kind exchange agreement made with principal tenant worth $7.5 million
