AEW, Griffith Buy 188,000-SF Warehouse from Normandy Via JLL for $21.7MOctober 24, 2017 — By Joe Clements
PEABODY—AEW Capital Investments’ fledgling $650 million Fund VIII has planted its flag on the North Shore where $21.7 million was just spent to buy One Technology Dr. in a joint venture with Griffith Properties. The erstwhile home of US Foods Corp. has been transformed into multi-tenanted warehouse space by longtime steward Normandy Real Estate Partners, which was represented by JLL Capital Markets in harvesting the 188,000-sf facility built in 1982.
Bank of America financed the acquisition with a $14.4 million mortgage arranged by JLL. Griffith Properties principal Marci Griffith Loeber would not discuss lending aspects for the purchase but does confirm to Real Reporter her partnership has taken on an asset which Normandy had owned since paying $16.1 million in August 2006. “We were able to convince AEW this was a really nice deal to chase . . . and are very excited about coming out on top against some really aggressive (bidding),” recounts Loeber, whose firm owns an office building with AEW in Tysons Corner, VA, their relationship extending back to a signature Griffith Properties investment, restoration of several flex buildings on Ballardvale Avenue in Wilmington in the 2000s into a first-class office park.
Both parties have been on the prowl for industrial, Loeber explains, with Griffith Properties presently owning a large Dedham warehouse, the 234,000-sf 480 Sprague St. held in a joint venture with Echo Bridge Partners. “We would like to buy more, absolutely,” Loeber relays, speaking for Griffith Properties which has multiple capital groups it unites within a diverse portfolio that extends to Washington, DC, by way of Philadelphia. Besides Loeber, who serves as Chief Investment Officer, other key principals are founder J. Brad Griffith and Director of Acquisitions John A. Mannix.
JLL Capital Markets Managing Director Frank F. Petz concurs the Peabody exclusive was coveted by a variety of suitors, the structure desired for both its individual attributes and being an asset class wildly in favor all of a sudden. “Industrial has never been hotter . . . especially for something like this,” he says of the development which is situated in the master-planned Centennial Park set along Route 128 near Interstate 95.
JLL Managing Director Jessica Hughes and Associate George Gregory joined Petz in advising Normandy and procuring the buyers of One Technology Dr. On the financing aspect, Petz affirms JLL arranged the Bank of America loan on behalf of P8/GP4 LLC, citing Executive VP Heather Brown and Senior VP Robert Borden as the debt and structured finance team handling that aspect, terms of which he would not divulge, including BofA’s loan amount which other sources reveal to be $14.4 million.
Leasing brokers for Normandy at the time of One Technology Dr.’s trade were JLL Managing Director Ed Jarosz and Senior VP Tony Coskren. It had been fully occupied by US Foods Corp. until that group departed five years ago for Seabrook, NH, forcing Normandy to scramble and reposition the building that is today back up to 82.5 percent occupancy, with one tenant filling over 60,000 sf through 2027. Loeber says a brokerage has not been hired to restock the fallow portion, leasing up the space a goal of the new partnership which does enjoy a healthy measure of cash flow in the meantime. “We feel very positive about this,” Loeber says, and fresh statistics from Perry Brokerage Associates should further assuage the upbeat outlook.
According to PBA research chief Brendan Carroll’s Q3 figures, the North Shore warehouse inventory of 7.44 million sf has a razor-thin 3.8 percent vacancy and an asking rent of $6.52 per sf, while flex/industrial product encompassing 7.6 million sf is at 6.8 percent vacancy and averages $8.45 per sf. On the latter front, that is ahead of the total market median of $7.69 per sf while close to the 6.2 percent average vacancy for 56.7 million sf tracked by PBA. The warehouse inventory in PBA’s survey totals 85.1 million sf and is at 7.2 percent vacancy with $6.39 per sf its average asking rent.
As a last-mile investment, Centennial Park is close to several uber-exclusive communities such as Hamilton-Wenham, Lynnfield, Marblehead and Newbury, and the North Shore has separately become a relief valve for logistics companies being pushed out of the urban core near Logan International Airport about a dozen miles south. “It is a very good market for industrial, and AEW was able to understand that along with everything else we like about it,” says Loeber of One Technology Dr. and its environs.
P8/GP4 LLC lists as signatories Mark L. Davidson, James J. Finnegan and Paul Ketterer, officials at AEW. Fund VIII launched a year ago and is now actively making purchases focused on opportunistic US assets not always chased by the institutional set, multi-tenanted industrial among the stated targets by fund organizers. The vehicle “will consider opportunities in repricing, capital dislocations and market arbitrage,” one assessment outlines citing multi-family industrial in a category along with hotels deemed “currently out-of-favor” among the institutional set.
Energy markets including Houston are venues for dislocations, adds the overview, as are opportunities to reposition first-class apartments considered outdated by current standards even though they are barely a decade old in many instances. The wish list is also in search of transforming markets such as Portland, OR, and Salt Lake City, generally communities determined to be “hubs for well-educated, creative workforces” that provide a foundation for redevelopment or new construction of apartments, industrial, office and retail.
It is unclear whether any sector is getting preference, but industrial investment has emerged this decade for a broad range of capital groups including clients of AEW such as pension funds, with the Kansas Public Employees Retirement System among those identified in media reports as participants in Fund VIII, that contribution estimated at $50 million
For JLL, the popularity of industrial has played into one of its strong spots as evidenced by a series of recent Capital Markets conclusions in that arena. JLL was the broker, for example, on six southeastern Massachusetts flex/industrial assets acquired in late summer by Colony Realty Partners on behalf of James Campbell Co., the listing involving assets totaling 188,500 sf located in the Cabot Business Park. They yielded $25.6 million, or about $135 per sf.Jessica Hughes Marci Griffith Loeber Frank Petz Heather Brown George Gregory