MINNEAPOLIS—It looks like the Twin Cities' soaring industrial economy has opened up opportunities for owners willing to sell. Fairbridge Properties, for example, recently sold a 261,805 square foot industrial facility in suburban Coon Rapids to Shopoff Realty Investments for about $14 million. Fairbridge owned the property for less than three years but realized an internal rate of return of 75%.
“We were buying the property as a long-term hold,” Dr. Dmitry Gordeev, Fairbridge's founder and managing partner, tells GlobeSt.com. The Princeton, NJ-based firm “started improving the asset from day one as if we would hold it for twenty years.”
Occupied by longtime tenants Honeywell Aerospace and MEDRAD, the flex facility benefits from a number of physical improvements made by Fairbridge. These include repainting the entire exterior of the building, replacing the windows, resurfacing the parking lot, retrofitting the parking lot lighting, replacing a number of RTU HVAC units, and implementing an annual preventative roof maintenance program.
However, “in the last two and a half years the vacancy rate has shrunk tremendously in Minnesota,” falling to about 4.5%, Gordeev adds. “That allowed developers to start construction on spec buildings,” and boosted the region in the eyes of other investors.
But what made this particular deal really come together was Fairbridge's pre-development work on an 86,764 square foot research and development facility, built-to-suit, on the same property. The Irvine, CA-based Shopoff has a great reputation as a developer, Gordeev says, and will continue with the new project. “The stars aligned; it was a perfect fit between us and them.”
The benefits to Fairbridge's investors don't stop there. The company sold the Coon Rapids property as part of a reverse 1031 exchange. And it used the proceeds to help complete the $21.5 million purchase of Landmark Center, a class A office tower in downtown Indianapolis. The office market in that CBD has struggled a bit in the past few years, but as reported in GlobeSt.com, recently it has shown signs of revival. And a new agreement between a health services firm and Fairbridge has brought the 12-story Landmark up to 100% occupancy.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
