Fairlead Merging With Salt Lake City Firm For $500M Suburban Office Shopping Spree

A longtime Atlanta office investor has joined forces with a Salt Lake City firm for a new $500M fund shopping for suburban office properties across the U.S.

Fairlead Commercial Real Estate — run by Atlanta commercial real estate vets Jeff Shaw and John Ward — has merged with Bridge Investment Group Partners, and in turn will be rebranded Bridge Commercial Real Estate.

John Ward Fairlead Commercial Real Estate
Photo credit: Courtesy: Fairlead Commercial Real EstateJohn Ward

Fairlead, which has purchased 37 office buildings since forming in 2012, is in the midst of raising a new, $500M fund that will target more suburban office properties, including assets under contract in Richmond, Va., San Jose, Calif., and Raleigh, N.C., Ward said.

Beyond the partnership, Fairlead's mission will remain the same, focusing on Class-A and B suburban office assets between $25M and $65M.

“We will continue to grow our existing portfolios within the cities in the Southeast,” Ward said, "but we will also now include major markets in Texas, Phoenix, strategic markets in California, the Pacific Northwest, and high-growth Mountain West cities like Las Vegas and Salt Lake City."

The Park at Windward Concourse
Photo credit: Courtesy: Fairlead Commercial Real EstateThe Park at Windward Concourse

The two firms more recent transactions include The Park at Windward Concourse, a two-building, 202k SF suburban office park in the affluent Alpharetta market in the northern outskirts of Atlanta; Bayview Corporate Center, a 12-story, 413k SF office tower in Fort Lauderdale; and a 238k SF suburban office campus called Brookfield Corporate Center in Greenville, S.C.

Bridge/Fairlead — with more than 5M SF of assets under management — pools funds from both foreign and domestic institutional and high-net-worth investors, Shaw said, and will compete for office assets in a market that's expected to top $700B globally this year, according to a recent JLL report. But unlike other institutional investors and bigger funds, the firm goes against the investment grain with office.

That comes with its own risks, of course. The 2017 Urban Land Institute/PricewaterhouseCoopers Emerging Trends in Real Estate report paints a mixed picture on suburban office investment, but does point to opportunities for some investors. Suburban office has been distinctly out of favor. Suburban office park properties without amenities, most of which are already nearly illiquid except to opportunity investors, will likely fall further in value in 2017, ULI states.

“Maturing debt is expected to bring to market 'underwater' assets in 2017," according to the report. "Deep discounts could be required to move these properties. Some opportunistic buyers are likely to be interested, though, believing that they can be rented to cost-conscious tenants.”

And not all analysts were negative on suburbia. CoStar reported last month that analysts see leasing momentum shifting out of the central business districts and into the suburbs. Cushman & Wakefield's global chief economist Kevin Thorpe recently echoed those sentiments.

“This may be a good year to take advantage of pricing dislocation in the suburbs,” Thorpe said. “Suburban office is a growth story in the making, and the fundamentals are improving more than most people realize.”

“We think suburban assets provide the best risk-adjusted return, as there is more room to run on office demand and both rent and valuation and we see much in the way of opportunity here,” Ward said.

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