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American Assets Trust, Inc. AAT announced that it entered an agreement for the acquisition of Eastgate Office Park, a multi-building office campus situated in the premier I-90 corridor submarket of Bellevue, WA. The company will use cash on hand to shell out $125 million for the acquisition.
The acquisition is subject to customary closing norms.
The office campus spans approximately 280,000 square feet across four multi-tenant office buildings. The campus is more than 95% leased to a diversified tenant base and has a weighted average lease term of around 3 years. This is likely to provide rental income visibility in the near term.
Also, the property offers excellent on-site amenities, a campus setting in a natural landscape with walking trails, a diverse tenant roster of technology and professional services companies and easy access to I-90. Given the growing preference for high-quality, well-located properties, which provide top-notch amenities; Eastgate Office Park is likely to continue seeing decent interest from office occupiers.
Also, the company believes that the contractual lease rates of the campus are below market rates prevailing in the submarket. This likely provides scope for improvement in lease rates.
Furthermore, the campus recently received municipal nods for rezoning and enhancing the floor area ratio from 0.5 to 1.0. This offers significant additional development opportunities and is likely to enhance the value of the property.
As the impact of the pandemic subsides, an increasing number of companies has announced plans to return to office. This along with significant government stimulus is likely to support office market fundamentals. Hence, the acquisition of this office asset will likely enable the company to participate in the rebound of the office real estate sector, which was earlier on tenterhooks due to shelter-at-home restrictions, low occupancy and a remarkable decline in leasing volume at the onset of the pandemic.
Shares of this Zacks Rank #3 (Hold) company have gained 21.6% over the past six months compared with the industry's growth of 17.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, the company’s retail portfolio does not seem to have escaped pandemic blues just yet. In fact, because of the pandemic, a significant number of tenants closed or continue to close their businesses temporarily or permanently. Others shortened or continue to shorten their operating hours or offer reduced services. As a result, issues like rent collections and lower leasing have emerged as a pressing concern for companies like American Assets Trust, Simon Property Group SPG, Kimco Realty Corporation KIM and Federal Realty FRT.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
Federal Realty Investment Trust (FRT) : Free Stock Analysis Report
Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
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