Low occupancy a challenge

The financial package for the $20.7 million sale of the Brookside Corporate Center in Reno didn't come together easily.

The three-building, 261,296-square-foot flex-industrial complex at Rock Boulevard and McCarran Boulevard was sold by Indianapolis-based Scannell Properties to Chesapeake Real Estate Value Investors, a fund managed by Legg Mason.

The 103,000-square-foot FedEx ground distribution facility in the industrial park is not part of the sale.

Chesapeake Real Estate Value Investors plans to lease up the project which is only 43 percent occupied and sell it within 36 months. The fund specializes in adding value through improved occupancy or capital

improvements at the properties it purchases around the country.

The low occupancy of the project presented a challenge to getting the financing package together, said Mike Guterman of Highland Realty Capital Inc., the Los Angeles company that arranged $18.05 million in floating-rate bridge financing for the transaction.

Guterman said the financing was priced "in the low 5 percent range."

He said the financing package includes a debt-service reserve as well as an earn-out that's based on a certain debt-coverage hurdle. Those were enough, he said, to calm the nerves of a lender.

The buildings are on land leased from the Reno-Tahoe International Airport, and the project was built by

Trammell Crow Construction in 2006 and 2007. CB Richard Ellis will continue to oversee leasing and management of the property, a role it's played since the buildings were completed.

Aiman Noursoultanova of CB Richard Ellis represented Scannell Properties in the sale.

She said flex industrial space in the airport area has been in high demand, and the lack of land for development in the area creates a barrier to entry by other developers.

Current tenants of Brookside Corporate Center include consumer-products companies as well as communications and security providers.