Total square feet: 2,110,005 SF
Oklahoma City-568,607 SF Dallas-504,155 SF Houston-1,038,243 SF
Panther and ATCAP closed the acquisition of the underlying properties in ATCAP Fund I on November 15, 2017. The portfolio was a collection of 35 industrial warehouse buildings located in Dallas, TX (504,155 SF), Oklahoma City, OK (568,607 SF), and Houston, TX (1,038,243 SF) totaling 2,111,005 SF. We acquired the portfolio for $127,207,000, or $60.26 PSF and the original operating plan called for a 5-year hold with a projected sale at $169,357,000 or $80.23 PSF, applying a 6.60% cap rate. Projected LP returns at the time of acquisition were a 15-17% average annual return and a 1.80x multiple on invested capital (MOIC).
As a result of its strong performance leading up to, throughout, and subsequent to, the first COVID pandemic, the industrial category has become a very popular segment in which to invest, attracting both large institutions and local sponsors. Fund I’s presence in two leading industrial markets (DFW and Houston) along with a strong secondary market (Oklahoma City) positions it well for institutional capital looking to expend their presence in fast growing American Southwest. Panther and ATCAP agreed that in order to maximize investor returns, the property should be included as part of a larger industrial portfolio to be marketed to institutional investors, who have the ability to pay premium valuations given they possess the lowest cost of capital.
ATCAP Fund I Industrial was packaged for sale with 3 other investment portfolios by East Dil in July 2021. Panther is a part owner of 2 of the 3 other properties, specifically DFW 35/75 (700,790 SF, Dallas, TX) and Denver Industrial (535,703 SF). The 4th property in the portfolio is a 181,688 SF property based in Austin and Houston known as Market Street where Panther was not involved. The total square footage of the offering was 3,529,423 SF. Prior to marketing the property for sale, we received Broker Opinions of Value (BOV) from East Dil along with ATCAP’s internal valuations on each of the underlying properties. The midpoint of the BOV for ATCAP Fund I was $213,000,000 or $100.89 PSF.
ATCAP Fund was a strong performing asset since acquisition. It began paying an 8% annualized distribution in its first full quarter of ownership and had regularly maintained strong occupancy (90%+) throughout most of Panther’s holding period. It missed one distribution payment during COVID-19 (1Q 2020) but has otherwise been a very consistent payer. At the time of acquisition, the accrued, unpaid preferred return as a percent of original investment was expected to be only 7.3%.
EXECUTION AND SALE
Panther investors achieved an average annual return of 28.1% and a multiple on invested capital (MOIC) of 2.13x over the 4.0-year holding period. These returns compare to our original underwriting of 15-17% average annual return over a 5-year holding period. At closing, Panther LP’s received a distribution equivalent to 1.82x of their original investment (previous distributions amount to .31x original investment – thus the total of 2.13x).
This sale exceeded our pro-forma projections providing a 2.13x multiple to Panther FW Investors and an annual average return on investment of 28.1% over the 4-year holding period.