GENESIS FINANCIAL ENTERS NEW MARKETS FOR GOVT BUILDINGS

Count on more government office/industrial flex building investors to enter new markets in search of acquisitions, as they seek stable investments during the recession. Expect Genesis Financial Group to join the quest for acquisitions of single-tenant, government-leased office buildings nationwide. Genesis earlier this month made its first acquisitions of government-leased buildings in New Mexico and Pennsylvania. The Grosse Ile, Mich.-based company hopes to do five times its 2001 acquisition volume by purchasing $100M in suburban properties. Much of the activity will be for a public real estate investment trust that is currently in the fund-raising stage.

Genesis began 2002 with the acquisition of five properties in four separate deals in Illinois, New Mexico, Pennsylvania and Texas. The private syndicator’s portfolio now stands at about 34 properties nationwide.

The most recent acquisition is the Jan. 11 purchase of a Roswell, N.M., property that is fully leased to the Bureau of Land Management. Genesis pays $3.14M for the 31,000 s.f. building, located at 2909 West Second St. It was built in 1996 and has an 11.04% cap rate.

Genesis on Jan. 10 picked up its third Veterans Administration office building for nearly $2.11M. The property trades at a 9.63% cap rate. The 18,300 s.f. building was built in 1997 at 301 N. Elmira St. in Sayre, Pa. Twelve years remain on the lease. A day earlier, Genesis closed on the purchase of a Social Security Administration building in Hillside, Ill. Genesis paid more than $2.76M for the 14,150 s.f. building located at 230 N. Mannhaeim. The four-year-old building has an 11.02% cap rate, with 16 years remaining on the lease.

Genesis acquires two new post office buildings in Texas on Jan. 2 for a total $1.73M. Both properties have 20-year leases with the U.S. Postmaster and command cap rates of at least 10.4%. One property is located in Waller, Texas, at Business Highway 290 and contains 9,040 s.f. The other is a 7,140 s.f. building located at 703 Church Street East in Bernard.

Genesis has three more deals under contract and expected to close by mid-February. The investor is buying two more Social Security Administration buildings: a 21,000 s.f. facility in Milwaukee for $5.15M, and a 13,590 s.f. building in Brownsville, Texas for $2.3M. The third is a 20,886 s.f. building in El Paso, Texas. Genesis offers $2.7M for the property that is leased to the Immigration and Naturalization Service.

Genesis is currently trying to raise $25M in capital for the Gen-Net Lease Income Trust. Slated to go online in March, the trust is planning to do $75M to $80M in acquisitions during the next 12 months. It seeks suburban, single-tenant office buildings leased to investment-grade corporations. Genesis likes suburban buildings because they tend to command a more consistent cash flow. Genesis would like to buy 20 to 30 properties this year, priced between $3M and $20M.