Amazon Full-Building Tenant in Hudson Flex Property

HUDSON—In more ways than one, JLL Capital Markets has a teaser out regarding a net-leased flex property for sale here in this MetroWest suburb on behalf of owner R.J. Kelly Co. The brochure touting 428 Main St. brags of its “desirable credit tenant” whose corporate backing and six years remaining have CRE watchers anticipating a bidding war for the assemblage of office, R&D and high-bay warehouse space.

While confirming that listing which is being conducted minus an asking price, JLL cannot say who the tenant is, with Capital Markets member George Gregory explaining they are bound by confidentiality agreement from identifying the entity. Anyone interested needs to sign their own pact to unveil the prospect, he says, although the name recognition and 428 Main St.’s presence on the edge of downtown Hudson would seemingly make the tenant difficult to keep under the radar. Such is the case, therealreporter.com quickly found.

According to multiple sources, the denizen is Amazon. “That is the tenant,” one industry professional affirms when asked regarding the reports. There are six years of term remaining in the deal at 428 Main St. and the tenant has a pair of five-year renewal options. A new owner would be looking at annual rental increases through 2023 of 7.12 percent including a 9.09 percent leap next February and ultimately hitting $7.75 per sf at maturity.

Besides an 8 percent average annual unlevered yield generated by the in-place rent, 428 Main St. has future upside anticipated in the rent is expected to be 25 percent below market rate at lease expiration. Even were Amazon to take its proverbial drones elsewhere, 428 Main St. is cited for having an adaptable footprint to accommodate a range of users, JLL outlines in the offering memorandum. Modernized twice in its 40-year history, the structure set on 5.1 acres off Interstate 495 near the juncture of Interstate 290 has a half-dozen loading docks, efficient column spacing of 32’x32’ and 24-foot clear heights in the warehouse. “It is a a great piece of real estate,” says Gregory, who is working an the assignment with Capital Markets Co-Leaders Christopher Angelone and Frank Petz plus Managing Director Jessica Hughes. Tony Coskren is available for leasing market insights and Rob Borden for debt sources.

Market forces at play—including the e-commerce effect seemingly helping 428 Main St. directly—have revived many suburban Boston flex and industrial assets in a genre which has spent the past 10 years in limbo. JLL estimates rents are up 20 percent in the past four years and puts flex vacancy down from 20 to 14 percent. Transwestern RBJ further illustrates the gains in its latest market survey putting the Interstate 495 Central flex rent at $9.22 per sf—up from $7.35 per sf in Q4 2012—with a YOY gain from Q4 2015 of 18.2 percent. The research puts vacancy on 4.6 million sf of inventory at 11.4 percent compared to 17.9 percent in Q4 2012.

Tours are being held this month in the process that could see offers in place by month’s end. R.J. Kelly Co. is moving the property through its extensive pipeline quicker than normal, having paid $4.0 million in November 2015 for the asset, or approximately $49 per sf, whereas market estimates predict suitors will compete in the $80-per-sf realm, or around $6.5 million to $7.0 million. In declining to discuss those figures, JLL does maintain whatever 428 Main St. brings will probably be less than half of replacement cost.

JESSICA HUGHES FRANK PETZ GEORGE GREGORY