08/25/2010

After Sale Fades, Exeter Lists Bigger Pool

Exeter Property could attract bids of up to $225 million for 17 industrial properties, including seven that Welsh Cos. backed out of buying last month when its planned IPO failed to get off the ground.

The 4.4 million-square-foot portfolio is 98% occupied. At the estimated value of $45/sf, the initial annual yield would be about 7%. Exeter prefers to sell the Class-A portfolio intact, but will consider bids on individual properties or groups of properties. CB Richard Ellis has the listing.

Exeter, a fund shop based in Plymouth Meeting, Pa., had struck an off-market deal to sell the seven properties, encompassing 1.7 million sf, to Welsh for $69.2 million. They were part of a buying spree that Welsh intended to finance with the proceeds of a $350 million IPO. In all, the Minnetonka, Minn., firm struck deals to buy 23 properties totaling 9.6 million sf in 11 states. But the collapse of the IPO left Exeter and other sellers scrambling to find new buyers.

Exeter decided to repackage the properties earmarked for Welsh with others that it owns via its $357 million Exeter Industrial Value Fund and bring a bigger portfolio to market. Separately, Westmount Realty of Dallas and Yucaipa Cos. of Los Angeles are once again shopping Logistics Pointe, a 1.1 million-sf industrial campus in Charlotte that Welsh had agreed to buy for $35 million. CB is also handling that assignment.

But Exeter also found opportunity in the Welsh IPO collapse. It scooped up two properties in Memphis totaling nearly 820,000 sf that Welsh had planned to purchase. The investment manager paid Principal Financial $20.7 million for the warehouses. Exeter now hopes to flip those properties, which are part of the portfolio it is offering via CB.

The other properties being offered are in key transportation hubs in or near Louisville, Ky.; Columbus, Ohio; Washington; Central New Jersey; Harrisburg, Pa.; Atlanta; Tampa; Charleston S.C.; and Greenville, S.C.

Nearly 60% of the $15.7 million of annual net operating income is generated from investment-grade tenants. The weighted average remaining lease term is 5.3 years, and the weighted average rent is $3.54/sf on a triple-net basis. Leases on 70% of the space were signed since the market collapse in the third quarter of 2008, when rents were under pressure. That could offer a buyer the chance to raise rents upon renewal.

The average age of the buildings is 10 years. The warehouses can accommodate multiple tenants, and four have potential for expansion. The largest tenants are: Exel (660,000 sf), Belnick (477,000 sf), Bare Escentuals (409,000 sf), hhgregg (393,000 sf) and Dunkin' Donuts (302,000 sf).

The properties are at:

*4460 Holmes Road and 4995 Citation Drive in Memphis.

*501 and 521 Industry Road in Louisville, Ky.

*5271 Centerpoint Parkway in Obetz, Ohio.

*14301 Mattawoman Drive in Brandywine, Md.

*20 East Park Drive in Mount Holly, N.J.

*300, 350A and 350B Salem Church Road in Mechanicsburg, Pa.

*4350 and 4360 Ball Ground Highway in Canton, Ga.

*2440 Clements Ferry Road in Charleston, S.C.

*1410 Old Stage Road in Simpsonville, S.C.

*260 Parkway East in Duncan, S.C.

*5200/5225 and 5300 Region Court in Lakeland, Fla.

The Exeter Industrial Value Fund, which seeks a 13-15% return, held its final equity close in 2008.

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