wcai industrial real estate update
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WCAI Industrial Real Estate Update. Brian S. Parrish, MBA Vice President November 11, 2010. Presentation Overview. Noteworthy Transactions Updates New Construction Proposed Construction Analyzing Flex & Warehouse Today 2011 Forecast & Beyond. - PowerPoint PPT PresentationTRANSCRIPT
WCAIIndustrial Real Estate Update
Brian S. Parrish, MBA
Vice PresidentNovember 11, 2010
Presentation Overview
• Noteworthy Transactions
• Updates
• New Construction
• Proposed Construction
• Analyzing Flex & Warehouse Today
• 2011 Forecast & Beyond
Noteworthy TransactionsOakwood Crossings Business Center
100 W. Oakwood Drive, Oak Creek
• Building Size: 139,726 Sq. Ft.• Sale Price: $8,664,000 ($61.96/SF) on
6/29/10• CAP Rate: Mid 8%’s• Seller: Opus North Corp.• Buyer: CenterPoint Properties Trust
Inc.• Tenant: Yaskawa Electric
Noteworthy Transactions529 N. River Road, West Bend
• Building Size: 105,000 Sq. Ft.• Sale Price: $1,750,000 ($16.67/SF) on 9/2010• Seller: Milliken Millwork• Buyer: Heartland Woodcraft• Largest transaction in Washington County to date• Vacancy rate dropped from 7.9% (Q2) to 7.3%
(Q3)• Another large deal is pending
• Building Size: 323,610 Sq. Ft.• Seller: HSA Commercial Real Estate• Buyer (user): Seda International Packaging Group
SpA of Naples, Italy• Sale Date: November 2010 (Price N/A)• 189 new jobs • Packaging for ice cream, beverages and fast food
containers.
Noteworthy TransactionsSeda Purchase in Mount Pleasant
• 85 Acres• Demolition almost complete
UpdatesDelphi, Oak Creek
• 2,200,000 SF on 86 acres• $3.5 mm acquisition & $34.6 mm redevelopment• To be demolished – 60 acre business park and
retail/multi-family
• Talgo leasing 133,600 Sq. Ft., $2.59/SF, 2 years with extensions
Updates“Century City”
Tower Automotive, City of Milwaukee
OTHER UPDATES
• Post Office in Oak Creek
• Oak Creek Water Park
• Chrysler Engine Plant, Kenosha– 109 Acres, 1,900,000 SF, 10-100 years old– Vacant & available – City could take over in 2011– Not part of industrial property base
Updates
• 1,100,000 Sq. Ft. on 20 Acres• Occupancy Q2 2010• Corporate relocation from Illinois
New ConstructionUline Corporate Campus
Pleasant Prairie, WI
• Building Size: 83,000 Sq. Ft.• CAP Rate: 9 cap-ish• Landlord: CenterPoint Properties Trust
Inc.• Tenant: Crothall Laundry Services Inc.• Delivery Date: Late February 2011• Occupancy: Late May 2011• Notes: Relocation from South Milwaukee
New ConstructionBuild-To-Suit, Oak Creek
• Occupancy Q3 2010• 81,000 Sq. Ft. Office Building• 175,480 Sq. Ft. Warehouse + 135,000 Sq. Ft. Expansion.• Irgens Development developed and leased office building.• Former space is vacant in Glendale.
New ConstructionActuant Campus
Westbrook Corporate Center, 124th Street & Westbrook Crossing, Menomonee Falls
• Construction finishing Q4 2010
• 114,000 Sq. Ft. on 8 Acres
• $17.5 million factory
• Developer: MSI General
• Makes generators for wind turbines
• Only 12 acres remain in the Industrial Center
New ConstructionIngeteam
Menomonee Valley, Milwaukee, WI
• 100,000 Sq. Ft. production area• Expansion underway• Original 135,000 Sq. Ft. built in 2006
New ConstructionPalermo Villa Inc.
Menomonee Valley, Milwaukee, WI
$5.20
$4.73
$4.22
$4.00
$4.20
$4.40
$4.60
$4.80
$5.00
$5.20
$5.40
2008Average
2009Average
2010Average
Dickman
Analyzing Flex & WarehouseDickman Lease Comps Vs. CoStar Asking Lease Rates
Assumptions: 3 years, Excluding Outliers, NNN’s $1.50 when leases were gross.
Trend: More transactions, more concessions, lower rental rates.Renewals will be a key factor.
$5.20
$4.73
$4.22
$4.35
$4.25 $4.23$4.00
$4.20
$4.40
$4.60
$4.80
$5.00
$5.20
$5.40
2008Average
2009Average
2010Average
Dickman
Costar
Analyzing Flex & Warehouse
• Landlord/Buyer should be examined:
– Ability to consummate lease transactions
– Concessions – free rent, TI’s
– Structure of deal – Cash flow
• So, what is the CAP rate?
Korpacz SE Wisconsin
Institutional 8.38 % 8.0 – 10.0 %
Non-Institutional 10.63 % 10.0 – 12.0+ %
Market Considerations
• TIFs & Development– Liberty Corporate Preserve (Oak Creek) received
construction extension from 2011 to 2014.
– West Bend – facilitating a purchase
• Receiverships
• Refinancing difficulties
• Short-sales
• Financing– Creative Sales: Seller notes, land contracts, trades– Continued difficulty in 2011
2011 Forecast & Beyond• Uncertainty from elections & high-speed rail will
settle Example: “The announcement won't mean immediate layoffs,
but casts a pall over the future of the [Talgo] plant on the former Tower Automotive property.” –Talgo Rep.
• Speculative development will remain flat– Upcoming large deals will cause supply shortfall in some areas
of Racine & Kenosha Counties
• Positive Absorption will occur
• Vacancy Rate: Will remain stable during 2011 – 9% benchmark.
2011 Forecast & Beyond
• Sales: Increasing volume of sales, prices will slowly rise from depressed levels in 2011.– Users– Bargain-hunters
• Leases: Rates will slowly rise from depressed levels in 2011– Landlord concessions to remain
Contact Information
Brian S. Parrish, MBAVice President
The Dickman Company/CORFAC Internationalhttp://www.dickmanrealestate.com
http://www.linkedin.com/in/briansparrish 626 E. Wisconsin Avenue, Suite 1020
Milwaukee, WI 53202(414) 278-6887