In partnership with Alex. Brown Realty, CIP acquired its first asset in Atlanta, Georgia: the Perimeter Place Business Park, a 103,419 square foot, six-building, multi-tenant business park in Doraville, located adjacent to the I-285 “Perimeter” Freeway, on the northern side of Buford Highway and south of Peachtree Industrial Boulevard. Situated about 20 minutes north from Downtown Atlanta and 25 minutes from Hartsfield-Jackson Atlanta International Airport, the Project is a very rare, small bay industrial/ flex park in this section of the city.
CIP purchased the Project for $8.25 million with a credit for capital expenditures of $410,000, for a net purchase price of $7.84 million ($75.80 psf). The total cost basis at the conclusion of the five-year business plan is estimated to be $8.91 million ($86 psf), which will include closing costs, capital expenditures, and reserves for roof and HVAC improvements along with anticipated TI and LC costs incurred during the ownership period. Due to the lack of available industrial-zoned land in the greater Atlanta area and very high construction costs, the replacement cost for the Project is estimated to be approximately $240 psf (with the land value alone, factored on building area, exceeding $60 psf). Thus, the Project’s “going in” and “exit” cost basis is substantially below replacement cost.
Built in 1984, the Project was designed to offer functionality and accessibility for industrial, flex, and office tenants. The Project’s location places it in one of the most sought-after industrial markets in the city due to strong demographics and work force, and a centralized location near the intersection of the I-85 and I-285 Freeways. Being in the northern side of the Greater Atlanta market, the Project is located directly across the freeway from one the largest redevelopment projects in Greater Atlanta, called the Assembly Yards, a $1 billion, 10 million square foot mixed-use center for office, retail, entertainment, hospitality, and multi-family residential amenities. The Project also benefits from a close proximity to the DeKalb-Peachtree Airport, which offers direct flights to and from Charlotte and will allow the Project to be managed by CIP’s East Coast team. Additionally, its prime location provides a home for a diversity of tenants, which require small suite sizes and ease of access for small businesses.
The Project comprises thirty-four (34) industrial/ office/ flex units ranging in size from 1,313 sf to 6,977 sf, with the majority of suites between 1,500 sf and 3,000 sf. The Project was 88% occupied at acquisition, and includes multiple leases that have rental rates averaging 15% below current market levels. All of the leases expire within the five-year business plan (with the exception to the two billboard leases), providing an excellent opportunity to roll rental rates to higher market levels and create staggered future lease expirations for sale benefit purposes. The resulting “value-add” plan comprises leasing the four vacant suites in the first year of the hold period (significant reserves are included for this requirement), restructuring and extending existing tenant leases, upgrading interior suites to a higher industrial finish to improve resale value, and completing modest exterior and cosmetic upgrades.
Included in the Business Plan’s $700,000 capital expenditures budget are reserves for roof replacement, HVAC replacement, vacant unit preparations, and for other cosmetic upgrades to the Project, including landscaping, signage and painting. These improvements will enhance appearance and functionality of the Project and increase appeal to current and prospective tenants. As stated above, in addition to these capital items, the Project will have reserves for future tenant improvement and leasing commission costs over the five-year business plan.
This investment provides an excellent opportunity to acquire a rare multi-tenant flex/industrial park in a rapidly-growing and gentrifying market at a significant discount to replacement value while providing excellent annual cash flow and appreciation in value.
