Agellan Commercial Real Estate Investment Trust has entered into agreements to purchase a light industrial property located in Northcentral Austin, Texas and a 50% interest in an industrial distribution center in the I-85 South submarket of Atlanta, Georgia.
The Newnan Distribution Center comprises approximately 1.9 million square feet of gross leasable area and will be acquired for an aggregate purchase price of approximately US$53 million (before closing costs), representing a going-in capitalization rate of approximately 5.5%, and a stabilized capitalization rate of approximately 7.25%.
The REIT, together with a private Canadian-based investor, intend to acquire the property through a strategic partnership, of which the REIT will have a 50% interest. The REIT will also provide asset management services to this new partnership. The REIT’s portion of the purchase price for this property is expected to be satisfied with cash on hand and/or proceeds from debt financing.
The property comprises modern warehouse and distribution features, is currently 87% leased to two tenants, and has a remaining weighted average lease term of approximately 16.4 years;
The purchase price is below replacement cost and this acquisition is expected to be accretive to the REIT’s adjusted funds from operations per unit;
The property is strategically located along the rapidly growing I-85 South corridor, which provides seamless access to a network of major transportation thoroughfares, including I-65, I-285 and I-75;
The property is expected to provide long-term stable cash flow as well as expected growth through contractual rent increases, and lease-up of the remaining vacant space; and
The Atlanta industrial market has established itself as one of the premier industrial markets in the U.S., offering excellent regional accessibility, a skilled work force and a low cost of operation, according to a prepared statement.
The acquisition of Corridor Park D comprises approximately 56,000 square feet of gross leasable area and will be acquired for an aggregate purchase price of approximately US$8.35 million (before closing costs), representing a going-in capitalization rate of approximately 7.59%.
The property is comprised of 4 suites that are all currently leased to a single tenant, with just over three years of the lease term remaining. This acquisition will be undertaken solely by the REIT and is expected to be purchased with cash on hand.
This acquisition is expected to be immediately accretive to the REIT’s AFFO per unit;
This property is well-located in the North Central Austin Submarket, which has recently seen strong occupancy and net absorption trends; and
The property is expected to provide a stable cash flow and will require limited capital expenditures due to recent improvements to HVAC, landscaping, painting and significant tenant investment.
The acquisitions are both expected to close by the end of the third quarter of 2018. Closing of the acquisitions are each subject to certain closing conditions typical for transactions of this type. There can be no assurance that all conditions to closing will be satisfied or waived.
“The REIT is excited to expand its presence in both the Atlanta and Austin markets in which the REIT has strong knowledge and has had historical success” said Frank Camenzuli, Chief Executive Officer of the REIT. “Although both properties currently have strong tenancies, they provide the REIT with the future flexibility to re-configure the spaces for multiple tenancies.”