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REA
February 08, 2017  

Brennan Retools Industrial Portfolio Offering

After failing to strike a deal on a massive industrial portfolio it shopped last year, a Brennan Investment partnership has carved out a smaller group of properties for a listing that could fetch about $170 million.

The new offering encompasses 24 fully leased, single-tenant properties totaling 3.4 million square feet across 13 states, with heavy concentrations in the Southeast and Midwest. At roughly $50/sf, a buyer’s initial annual yield would be 8%.

Brennan, an industrial-property shop in Rosemont, Ill., and its partner, Arch Street Capital of Greenwich, Conn., have given the assignment to Colliers International. The sellers will likely accept bids only on the entire offering rather than individual properties or smaller pieces. Brennan, which has roughly a 10% stake, is interested in staying on as an operating partner, but that isn’t a precondition of a sale.

The listed properties were part of an 11.7 million-sf portfolio Brennan marketed via Eastdil Secured last spring. At the time, it was thought that the package, which had an overall occupancy rate of 92%, would command a 7% capitalization rate. But the offering was complicated by a cumbersome ownership structure: The properties are held by several joint ventures involving Brennan and separate partners. Investors are being told the new offering is cleaner, involving a single ownership entity, fully stabilized properties and a bigger return.

The properties have long-term, absolute-net leases with average annual rent bumps of 2.4%. The tenants are responsible for maintenance and capital repairs, according to marketing materials, leaving limited property-management responsibilities for the owner — ideal for investors seeking a relatively passive investment.

The offered portfolio consists of 23 industrial properties and one office building, spread across 19 markets. There are 21 tenants, and 14 of them are headquartered in their space. They have a weighted average remaining lease term of 12.5 years and an average tenure of 25 years. Leases on just 16% of the space mature within 10 years, providing stability, and no single tenant generates more than 17% of the net operating income.

There are industrial properties in three Ohio markets: Cleveland (356,000 sf), Toledo (238,000 sf) and Cincinnati (218,000 sf). There are also three in Florida: Jacksonville (198,000 sf), Sarasota (106,000 sf) and Tampa (39,000 sf).

The others are in Roanoke, Va. (696,000 sf); Winston-Salem, N.C. (351,000 sf); Des Moines, Iowa (248,000); Milwaukee (175,000 sf); Chicago (144,000 sf); South Bend, Ind. (118,000 sf); Philadelphia (112,000 sf); Houston (100,000 sf); Albany, N.Y. (78,000 sf); Pittsburgh (62,000 sf); Spartanburg, S.C. (55,000 sf); and San Diego (44,000 sf).

The one office building is the 33,000-sf Chrysalis Center in Fort Lauderdale, Fla., which is fully leased until 2028.