Elgin Area Chamber Of Commerce: This Amazon Warehouse Sale May Be The Biggest US Industrial Deal So Far In 2022

Press release from the Elgin Area Chamber of Commerce:

February 15, 2022

The $326.2 million sale of a warehouse sprawling millions of square feet that's leased by e-commerce giant Amazon has vaulted tiny Bondurant, Iowa, into the highlight reel of the nation's biggest real estate transactions thus far in 2022.

Capital Square, a Glen Allen, Virginia, firm that focuses on tax-advantaged real estate investments, emerged as the winning bidder for the four-story, 2.68 million-square-foot distribution center at 500 32nd St. in Bondurant, which went on the market in May 2021, about six months after it opened.

The deal with the seller, the real estate investment arm of Chicago-based financial services firm Mesirow, is the largest industrial transaction in the nation thus far in 2022, according to CoStar data, and appears to be an all-time record-breaker for Iowa, where it has handily eclipsed the previous title holder, the $101.7 million trade of the Hilton hotel in Des Moines in March 2018.

The sale ranks among the five largest single-property sales for all categories in the U.S. this year, according to CoStar records. The deal reflects the surging demand for industrial property across the country as the property type becomes more popular with the surge in online shopping that requires logistics space to sort orders to doorsteps.

Bondurant, a town of about 7,300 people roughly 15 miles northeast of Des Moines, has quadrupled in size since 2000 and was Iowa's second-fastest growing city from 2010 to 2020, according to census data. The town's growth has historically been fueled by homebuilding, a trend that is still dominant. Last year was the biggest on record for residential permits, according to Maggie Murray, Bondurant's planning and community development director, who estimated in a phone interview that plans were filed for 200 to 250 new homes in 2021.

"We've had really solid residential development for two decades," Bondurant City Administrator Marketa Oliver said in the interview, adding that at least three other employers have put down roots in Bondurant as well. "We haven't seen the job growth until the last few years."

Like the many new residents flocking to Bondurant, Amazon finds itself in a town with an abundance of open, relatively inexpensive land and easy access to the wider Des Moines metropolitan area, a six-county region that is itself a hot spot for population growth in the Midwest. Between 2010 and 2020, the Des Moines region grew 16.3%, to about 708,000 people, according to data kept by the St. Louis Federal Reserve. Amazon also operates a 270,000-square-foot sortation facility across the street from the warehouse. That property was sold in November for $76 million, according to CoStar data.

Representatives of Capital Square did not immediately respond to a request for a comment from CoStar News.

'State-of-the-Art' Property

Jon Hipp, principal of U.S. capital markets and head of the U.S. net lease group at Avison Young's Washington, D.C., office, who was part of the team marketing the property for Mesirow, confirmed the transaction details to CoStar News. Hipp worked with Jim Hanson, principal of Avison Young's capital markets group in Chicago, and Rich Murphy, senior vice president of the capital markets group in D.C.

"Mesirow thought Capital Square was the best buyer, the one most likely to close," Hipp said Friday. "It’s a state-of the-art Amazon property that plays a critical role in the company’s distribution network," he added in a subsequent email.

The deal works out to about $122 per square foot, far higher than the going rate in Des Moines, which stands at $85 per square foot for a top-tier industrial property, according to CoStar analytics.

The transaction was a zero cash flow deal, Murphy said, a type of financial structure that can be used to trade a property that has a creditworthy tenant and also a very high loan-to-value ratio.

"What that means is that the rent coming in from the tenant is exactly equal to what you would pay on the loan," Murphy said.

Such deals, he said, "permit people with very little equity to execute a 1031 [tax-advantaged exchange] for a large amount of debt with a small amount of cash and not trigger capital gains taxes."

Murphy and Hipp said that this is the third large sale the team has closed for Mesirow in the recent past, including one in Las Vegas and another in the Dallas area, for about $900 million total.

Source: www.CoStar.com

This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author’s own.