Lowe Snags 26-Building Industrial, Office Portfolio
- Jan 12, 2018
Lowe Enterprises Investors has partnered with a joint venture client to acquire the NL Ventures IX Portfolio, a 26-building collection of industrial and office buildings, from AIC Ventures.
The properties total 2.3 million square feet and are located in 16 states, spanning 24 major submarkets primarily in the Midwest and Eastern U.S., with the largest concentrations in Connecticut, Illinois, Ohio, Minnesota, Wisconsin, Texas, and New Jersey.
“There were multiple appeals to the portfolio. The combination of investor interest in stable, cash-flowing assets combined with the ability to secure attractive, low interest financing.” Bleecker Seaman, LEI’s co-CEO, told Commercial Property Executive. “The NNN, long-term leases provide stable double-digit cash-flow.”
Seaman also cited the stability of the tenants (24.7 year weighted average tenure) as being a strong reason for purchase, as well as the fact that more than 60 percent of the spaces serve as corporate headquarters, which should lead to increased renewal probabilities. “The portfolio consists of stable assets with long-term leases that can weather economic cycles,” Seaman said. “With 13.2 years of remaining average lease term and only one lease expiring during our projected hold, the portfolio offers very predicable cash flow.”
Most of the properties are industrial buildings that range from flex to light manufacturing facilities, and four are suburban mid-rise office buildings. They are all 100-percent leased to long-term, single tenants with an average 13-year remaining lease term.
The properties in the portfolio were constructed between 1954 and 2008 and many of the buildings have been upgraded and expanded over the years.
A New Strategic Shift
According to Seaman, this acquisition represents a slightly new strategy for LEI.
“While we have historically preferred opportunities where we can add value to assets, there is benefit in balancing that strategy with stable investments as we enter the late stages of an economic cycle,” he said. “This portfolio requires little to no capital, is 100 percent occupied and has no loan maturity for the next six years.”
He sees the industrial market being extremely strong nationally, and the vacancy in these markets are single-digit with no new supply. “Unlike most logistic buildings, these tenants are primarily manufacturing facilities serving the region,” Seaman said. “They have a strong local workforce, they serve the local market and on average have been in the same location for over 16 years.”
In most cases, the building’s tenants are responsible for maintaining both the interior and exterior of the building; however, Seaman noted that if a tenant would like to expand or make improvements prior to the end of their lease term, the company would like the tenant to approach them for the capital.
“This creates a win/win situation,” he said. “The tenant gets the improvements needed to increase their business and the landlord benefits from an improved property with a longer lease term. In fact, we had several tenants express interest in expanding as we went through due diligence.”
Last month, PCCP provided Lowe Enterprises Investors, acting on behalf of one of its investment clients, a $22.5 million loan to recapitalize the 175‐key Aloft Hotel at the EpiCentre, in uptown Charlotte, N.C.
Photos courtesy of Lowe Enterprises Investors