There are ordinary deals and then there are the big deals. And Jones Lang LaSalle’s sale of the Core Midwest Distribution Portfolio — a five-building, 2.7-million-square-foot portfolio — definitely ranked as a big one.
Jones Lang LaSalle’s Capital Markets group sold the portfolio in February to Welsh Property Trust, which purchased the portfolio for $99.5 million. The buildings sold, on behalf of KTR Capital Partners, sit in Chicago, Indianapolis, Cincinnati, Columbus and Walton, Ken.
John Huguenard, international director for Jones Lang LaSalle, told Midwest Real Estate News that Jones Lang LaSalle could probably have sold the five buildings in five individual sales. That would have been a positive. But selling all five buildings in one sale? That was a definite win for.
“We are much happier with how this happened,” Huguenard said. “The size of this portfolio was unusual. And having several different Midwest locations in one portfolio I thought would have been a plus but turned out to be more of a challenge.”
The deal closed, though, because Jones Lang LaSalle – whose team on this transaction was led by Huguenard and executive vice president Peter Harwood — found the right buyer from a debt perspective, one who needed the leverage that this portfolio provided. At the same time, the portfolio was priced competitively.
Instead of building new locations, Welsh Property Trust received fully built buildings that were all priced at or below replacement costs. This, Huguenard said, was one of the keys to closing the sale.
Then there’s the promise of future rent growth for Welsh. Huguenard ponited out that many of the tenants currently occupying the buildings are paying lower rents because they moved in when rents were lower than they are today. In the future, then, Welsh can demand higher rents either from these existing tenants or new ones moving into their buildings, something that can result in an income stream that grows throughout the portfolio’s life.
“There will be increased yield over the course of time,” Huguenard said.
The buildings’ locations were also attractive to Welsh.
“This portfolio is located in four of the top industrial distribution markets in the Midwest,” said Harwood, in a written statement. “Each building has access to some of the nation’s top rail and distribution hubs, connectivity to major Midwestern transportation routes and direct access to high concentrations of the U.S. population.”
According to Jones Lang LaSalle, each of the five buildings were built in 2006 or 2007.
535 Shingle Oak Drive in West Chicago, Ill., is a 150,000-square-foot fully leased property on 11.68 acres. 1105 East Northfield Drive in Brownsburg, Ind., is a 526,200-square-foot fully leased building on 28.31 acres.
40 Logistics Boulevard in Walton, Ken., covers 543,512 square feet on 33.86 acres. 6766 Pontius Road in Groveport, Ohio, is a 745,000-square-foot property on 41.6 acres.
Finally, 3051 Creekside Parkway in Obetz, Ohio, includes 737,471 square feet, is fully leased and sits on 37.15 acres.
