Argosy Exits Kings Corner

Argosy Real Estate has successfully exited its investment in the King’s Corner residential land parcel, a 29 acre, 145 lot property in the South Snohomish County submarket of the Seattle MSA. Quadrant Homes closed on the purchase of Phase III of the project on October 19, 2012, and placed the remainder of the project under contract. Sale of the remaining property closed on January 9, 2013. Quadrant Homes is a major regional homebuilder and subsidiary of the publicly traded Weyerhaeuser Group.

On April 4, 2012, Argosy made a controlling equity investment in King’s Corner, an undeveloped assemblage of fully entitled residential land parcels. Argosy partnered with Oakpointe (formerly known as Yarrow Bay Holdings), one of the preeminent land developers in the Seattle area with expertise in site assemblage, entitlement, planning, and development. Oakpointe served as operating partner and was also a minority co-investor.

The property was bank owned and under fractured ownership at time of acquisition, and faced impending permit expirations. This severely limited the pool of potential buyers for the property, allowing the partnership to acquire King’s Corner at an attractive cost basis and create immediate value by reassembling the site and extending entitlements. The partnership further enhanced value by completing the initial stages of the pro forma business plan which included developing the first phase of approximately 45 lots. The partnership revised and finalized the site plan (yielding 10 additional lots at no incremental cost), executed agreements with utility providers, completed engineering designs, and initiated weather-sensitive cut and fill operations during the Pacific Northwest’s short dry season.

The enhanced value and marketability of the site quickly became apparent as the partnership began receiving unsolicited offers for the purchase of some or all of the King’s Corner property within two months of acquisition. After discussions with several homebuilders interested in the property, in early September 2012 the partnership reached an agreement to sell King’s Corner to Quadrant, structured as two separate transactions closing in October 2012 and January 2013. The sale to Quadrant generated greater net profits than pro forma expectations, over a greatly reduced hold period and with lower equity placed at risk due to the paper lot exit (compared to the pro forma business plan of finishing some lots). Argosy is pleased to have achieved this superior outcome and believes the results are a direct result of our ability to: (i) assess quickly the quality of an investment opportunity presented to us by an operating partner, (ii) efficiently move to a closing, (iii) add value to the project working with the operating partner and (iv) exercise flexibility with the business plan as circumstances and opportunities develop.