Case Study

Background:
A major consumer products company was consolidating its supply chain and owned a 450,000 sf regional distribution facility in Atlanta that had become excess to its operations. The building was configured as a single tenant building and was located in a submarket with the predominant tenant size ranging from 50-150,000 sf. The company wanted to retain a portion of the building for six months, which would limit the purchaser’s ability to re-tenant the building in deteriorating market conditions. The company competitively bid the building to several buyer candidates and selected a national owner of industrial properties as the preferred buyer. The following steps were necessary for the buyer and seller to execute a short term sale leaseback of the facility and reposition the building.

• Negotiate a fair short term lease with the existing owner as an integral part of the purchase price, recognizing the limited ability to market the entire building
• Remove antiquated racking systems to improve the marketability of the building.
• Engage adjacent users to inquire of expansion requirements
• Reposition the facility as a multi-tenant building to better match the submarket tenant base.

• Negotiated a six-month lease with the existing owner for 2/3 of the space, with the ability to begin repositioning activities during this period
• Included in the purchase price the requirement for the owner to remove the racking system upon the short term lease expiration
• Increased the number of entries to three to create a multi-tenant feel to prospective tenants
• Successfully negotiated a lease at closing for 60% of the building with an adjacent user enhancing the return expectations
• Enabled the consumer products company to achieve its objective of consolidation and reducing its supply chain costs, and scheduling an orderly transition out of the facility.