We acquired 109th Street Industrial with Fort Capital on November 16, 2020, for $56.40 PSF, or an all-in acquisition price of $63.86 PSF. 109th Street is located one mile north of Panther’s other industrial property with Fort Capital, Arlington Industrial. Our original plan was to lease the one upcoming vacancy at the property and hold the property with a goal of selling it as part of a larger portfolio sale with Arlington Industrial in 3 to 5 years at a planned disposition price of $85.12 PSF (5.50% cap rate). This investment was underwritten to deliver a 16.8% average annual return and a 1.84x multiple on invested capital (MOIC).
Panther, with the sponsor, Fort Capital, contracted the property off-market at a price point well below market and replacement cost.The property completed a significant renovation in 2019 which included the transition from a single tenant space to a 3-suite building with new paint, dock doors and electrical throughout the property along with updated plumbing and expanded office space and demising walls in two of the three suites. It was well maintained although the roofs would eventually need to be upgraded (a large percentage of the potential cost was incorporated in our underwriting). Fort reserved $250,000 for roof repair, $110,000 for foundation repair in addition to a $50K price reduction, and an additional $220,000 for other tenant improvements (TI) including leasing commissions (LC). $100,000 of the capex was allocated for office buildout in the soon-to-be-vacant suite and $70,000 for a new, leasable, paved and fenced truck court. The proposed capital improvement budget represented 9.6% of total capitalization, most of which was put on hold pending the outcome of the sale process. The new Van/Trailer Parking Court was completed under budget and the space leased for $1.47 PSF on a 12-month term.
EXECUTION AND SALE
As a result of strong demand for industrial properties in the DFW Metroplex, Fort Capital and Panther agreed to market 109th Street for sale as part of a larger package which included Panther’s Arlington Industrial portfolio. The marketing process commenced mid-March. Our original underwriting called for a sale in year 5 at $89.73 PSF. The property sold on June 30, 2021, for $92.06 per square foot; Panther Investors receivedan 81.75% average annual return and 1.53x multiple on invested capital (MOIC) over the 8-month holding period.
This sale exceeded our pro-forma projections providing a 1.53x multiple to Panther FW Investors and an annual average return on investment of 81.75% over the 8-month holding period.