The Company acquired Gwinnett Commons (“the Project”) on August 12, 2020, at a purchase price of $126.6 million. The Project is located in Norcross, Georgia, and consists of approximately 1,089,000 square feet of mid-bay industrial and flex/office product in addition to two separate development parcels totaling about 678,000 square feet of land area.
The primary value-added business plan elements are as follows:
- Maintain and increase rental rates to market levels in the industrial portfolio totaling about 944,000 square feet during the seven year hold period.
- Lease the balance of the vacant space and renew one key tenant in the flex/office portfolio and sell these three buildings totaling approximately 144,000 square feet as a “package” in the third year of the hold period.
- Develop a 94,550 square foot distribution warehouse building on the “parking lot” parcel in the first year of ownership.
- Sell the vacant office building land parcel in the first or second year of ownership or develop another 70,000 to 90,000 square foot industrial building, whichever is more accretive to the business plan.
- Complete over the course of the seven year hold period a significant capital expenditure program, including upgraded landscaping and signage in addition to installation of new roofs and HVAC units throughout the portfolio.
Located in Northeast Atlanta, immediately off the Beaver Ruin Road and Steve Reynolds Boulevard exits of the I-85 Freeway, the Project is arguably the best mid-bay industrial complex in this quadrant of the city. The portfolio comprises sixty-two industrial units ranging in size from 4,733 to 46,179 square feet and eight flex/office suites from 6,343 square feet to an entire building totaling 57,085 square feet. The Project was approximately 97% occupied upon acquisition with leasing activity on all of the available units, including several expansion and relocation scenarios from existing tenants.
As stated above, the Project provides the rare opportunity to develop two industrial warehouse buildings on land parcels zoned for distribution product. These two sites are among the last available parcels in the I-85 corridor to accommodate “last mile” distribution locations and the demand is expected to be very strong for build-to-suit options in 2021 and 2022.
Overall, the target levered IRR for the Project over the seven year hold period is modeled in the 15% range, but this return level would be considerably increased depending on the exiting pricing for the flex/office portfolio and the metrics associated with the two development parcels.