VEREIT Buys E-Commerce and Retail Store Distribution Center Leased to Fortune 500 Retailer
In February 2017, VEREIT acquired an approximately 1 million-square-foot distribution center leased to Best Buy. Best Buy (rated ‘BBB-‘ by S&P) is ranked No. 71 on the 2016 Fortune 500 list, with $39.5 billion in sales and more than 1,500 retail stores. According to earnings reports, approximately 10% of total revenue comes from e-commerce sales.
The property serves as a regional distribution and e-commerce fulfillment center for Best Buy, supporting approximately 180 stores and regional online sales. The property is the second largest distribution facility in Best Buy’s logistics network. This transaction represents VEREIT’s focus on single-tenant industrial properties.
A+ Credit Tenant near Nation's Capital
Banner Life Insurance
VEREIT had the opportunity to purchase a two-story, 115,758 square foot Class-A office building located in Urbana, MD - a master-planned community within the metropolitan areas of both Washington D.C. and Baltimore, MD. Based on the financial strength of the tenant, the mission-critical status of the property as a U.S. corporate headquarters, the long-term lease and the quality location of the property, the asset made a strong addition to the VEREIT portfolio.
The property serves as the U.S. headquarters for Banner Life Insurance, which is rated ‘A+’ (S&P). The recently constructed office building is subject to a long-term, NNN lease where the tenant is responsible for all expenses associated with the property.
Long-Term Lease on Executive Office of Financial Services Leader
VEREIT acquired and presently manages a three-building 481,854-square-foot built-to-suit office campus, which serves as the primary office for Merrill Lynch’s Global Wealth Management operations. This asset fits the strategy for VEREIT’s portfolio based on the investment grade credit rating of the tenant, contractual rent increases and quality location of the property.
The campus houses members of the executive team, credit card processing and billing, IT, and inbound call center functions, with a staff of approximately 6,800 employees. The office campus is located in Hopewell, NJ, an outlying suburban community located approximately halfway between New York City and Philadelphia.
Well-Located Online Retailer Warehouse Portfolio
VEREIT purchased three fulfillment centers in two states occupied by Amazon, the world’s largest online retailer. The total size of the three warehouse portfolio is approximately 3.0 million square feet.
The properties benefit from a skilled, employable workforce and a key southeast location with favorable proximity to major cities including Birmingham, Atlanta, Charlotte, Nashville, Memphis and Charleston. Each property has beneficial access to the Chattanooga or Columbia airport for commercial shipping, and the Columbia location benefits from good access to the Port of Charleston. Each property is subject to a long-term lease. Based on the credit quality of the parent company, a long remaining lease term, new construction and good location, VEREIT added the Amazon portfolio to its collection of mission-critical industrial properties.
VEREIT Adds Set of Three Specialty Grocery Stores to its Portfolio
VEREIT acquired a portfolio of three newly-constructed freestanding necessity retail stores in Arizona leased to Natural Grocers. Each property is subject to a long-term net lease. This transaction represents VEREIT’s focus on single-tenant necessity retail.
Founded in 1955, Natural Grocers opened its 100th store in 2015, adding more locations throughout 2017 in accordance with its expansion plans. Natural Grocers is a strong contender in the fast-growing natural food retail industry, and is the sole multi-regional supermarket to offer only 100% organic products in its stores.
Developer Partnership Produces Mission-Critical Office Property
MedAssets, Inc. is a publicly traded healthcare consulting firm that provides supply-chain consulting and revenue cycle management services for health systems, hospitals and healthcare providers across the U.S. VEREIT partnered with a leading developer, Trammell Crow Company, to develop a build-to-suit property for MedAssets to house a mission-critical regional operations headquarters.
The property is a Class-A, 225,000-square-foot, four-story office building staffed by more than 1,000 MedAssets employees. The facility is located within the Legacy Business Park in Plano, TX - a 2,665-acre master-planned business, retail and residential community. At closing, MedAssets entered into a pre-negotiated, long-term net lease.
Build-to-Suit with Trammel Crow for Corporate Headquarters
IFM Efector, Inc.
IFM Efector, Inc. sells electronic sensing devices used in automation applications in the United States and Canada. VEREIT partnered with one of the nation’s leading developers, Trammell Crow Company, to develop a 45,131 square foot build-to-suit office building. This property serves as the new corporate headquarters for the company, which was previously located in Exton, PA.
The property is part of a business park that includes several other new properties in a suburban office market approximately 30 miles northwest of the Philadelphia CBD. Due to its location near several freeways and interchanges within several miles, the property is easily accessible from Philadelphia, Wilmington, DE, and a variety of Philadelphia suburbs. At closing, IFM Efector entered into a pre-negotiated, long-term net lease.
Single-Tenant Retail Portfolio Acquired in Sale-Leaseback Transaction
In November 2016, VEREIT acquired a portfolio of four LA Fitness properties through a sale-leaseback transaction. LA Fitness is a leader in the health and fitness club category and is the largest non-franchised fitness club operator in the United States with approximately 4.9 million members. The single-tenant fitness facilities are in strong MSAs.
The terms of the sale-leaseback included a new long-term lease with multiple renewal options. This transaction represents VEREIT’s focus on single-tenant service retail, maximizing value through a sale-leaseback.
Interest Disposed in Jointly-Owned Shopping Center Portfolio
Chandler 101 Centers
VEREIT completed a disposition of its 45% interest in a jointly-owned portfolio consisting of three power centers in Chandler, AZ. The portfolio encompassed 751,563 square feet and included such anchor tenants as TJ Maxx, Walmart, Bed, Bath and Beyond, and Nordstrom Rack. Active portfolio management and the culling of specific joint venture assets play a critical role in optimizing the VEREIT portfolio.
While in possession of the jointly-owned properties, new creditworthy tenants were acquired by the Leasing team, enhancing the value of the center. The Asset Management team monitored the shopping centers’ performance and leveraged internal expertise to time the disposition appropriately. The sale of the portfolio positioned VEREIT for a reduction in its secured debt while reducing exposure to non-controlled joint ventures.
Corporate Headquarters Culled for Positive ROI
Via a sale-leaseback transaction, VEREIT purchased the corporate campus for Apollo Group, comprised of three office towers totaling 599,644 square feet. The property, originally constructed as a build-to-suit, houses key, strategic operations for Apollo Group and the University of Phoenix, including senior executive and administrative teams.
VEREIT monitored the for-profit education industry throughout the holding period. Increased risks in the industry in early 2014 and portfolio diversification initiatives were factored into the decision to market the property. The corporate campus was sold in February 2015 resulting in a positive ROI.
Strong Tenant in Thriving Business District Leads to Value Appreciation, Timely Disposition
In April 2013, VEREIT participated in a joint venture purchase of two office towers leased to AT&T, Inc. (S&P: ‘A’). The properties are located in the Midtown submarket of Atlanta, the second largest business district in the metro area and one of Atlanta’s most prestigious and dynamic business districts. The two buildings contain a regional headquarters, a network operations call center, disaster recovery facilities, marketing, business development and client development for the entire Southeast.
After considerable property value appreciation, VEREIT disposed its interest in the assets. A general cap rate compression trend has been driven by a combination of low interest rates and investor demand for assets with strong tenant credit located in primary markets. The transaction was part of VEREIT’s strategy to cull non-controlled joint ventures and allowed the Company to reduce balance sheet debt.
Office Building in Desirable Market Disposed at Attractive Cap Rate
VEREIT strategically disposed of a 100,400-square-foot office building located in the heart of Cupertino, CA’s business area. Kaiser Permanente occupied 11 buildings in the immediate surrounding area at the time of sale, which was otherwise dominated by Apple occupying more than 90% of all office space in Cupertino.
Kaiser Permanente is a leading healthcare provider serving over 9 million patients annually. The health system includes a medical staff of over 17,800 physicians and more than 177,000 employees. This transaction represents VEREIT’s focus on culling office properties as part of its strategic disposition program.
Interest Disposed in Office Campus, Reducing Exposure to Secured Debt
VEREIT completed a disposition of its interest in a jointly-owned office campus consisting of six office buildings in Pleasanton, CA. The campus serves as the corporate operations center for Clorox, supporting functions such as corporate legal, human resources, accounting and finance, as well as Clorox’s engineers and R&D employees.
Due to favorable appreciation, the sale of this asset generated income for the portfolio and positioned VEREIT for a reduction in its secured and floating rate debt. This transaction helped VEREIT surpass its disposition goal of $2.2-2.4 billion by the end of 2016, while strategically reducing exposure to non-controlled joint ventures and office properties.
Enhanced NOI by Re-Leasing Anchored Tenant for Shopping Center
Chandler Gateway is a 259,535-square-foot shopping center that was anchored by The Great Indoors and Hobby Lobby at the time of purchase in Chandler, AZ. When The Great Indoors showed signs of exiting the lease, VEREIT engaged a potential new anchor tenant early in the process.
VEREIT was able to add a better traffic generator at the Arizona power center. By signing Walmart to a new long-term lease, VEREIT exceeded the pro forma for the shopping center and improved credit quality. Attracted by the increased traffic with the addition of the Walmart Super Center, the Leasing team signed seven additional new tenants, adding more than $500,000 of annual Net Operating Income (NOI).
S&P ‘AA-’ Rated Fortune 100 Corporation Signs New 10-Year Lease
Nestle Holdings, Inc.
VEREIT negotiated a new long-term net lease with Nestle Holdings, Inc. for its occupancy of a 1.0 million-square-foot industrial facility located in Breinigsville, PA. Nestle has occupied the property since its construction in 1994, and has made significant investments in the facility throughout the life of the previous lease.
The property is an institutional-quality distribution facility in a strong industrial corridor on the East Coast. With a 355,000 square-foot air conditioned warehouse and a 22-car indoor railroad dock, the facility is a significant component of Nestle’s East Coast distribution operations.
Office Sublet Turned into Long-Term Lease in Denver Tech Center
Invesco Holdings Company
Invesco Holdings Company sublet a 144,048-square-foot office building to MDC Holdings, which assumed the existing lease with only two years remaining on the agreement.
Working with VEREIT’s Asset Management team, MDC Holdings entered into a new long-term lease upon expiration of the sublease at the end of 2016. By proactively entering into the lease with MDC, VEREIT substantially reduced transaction expenses and avoided carry costs associated with re-leasing vacant space. No outside broker or tenant improvement costs were required, and VEREIT gained a strong, long-term tenant. MDC Holdings is a BBB-rated national home builder and located its corporate headquarters in this property.
Long-Term Lease and No Vacancy at a Quick-Service Restaurant
When the lease was nearing expiration for a quick-service restaurant in Anchorage, AK, the franchisee/tenant was in a challenging position. The building was in a strong market, but the property was older and required capital expenditures to extend the agreement with the franchisor. The possibility of a vacant location requiring upgrades could present a challenge in re-leasing the property.
VEREIT’s Asset Management team had a 16-plus year relationship with the franchisor, which allowed the team to explore options to keep the property open. The franchisor stepped in to operate the store on an interim basis while simultaneously locating a new franchisee who would renovate the building. The new franchisee entered into a 20-year lease and took over a store in a strong location. VEREIT was able to partner with the franchisor to address a potentially challenging situation because of the team’s deep relationship.
Major Retailer “Blends and Extends” a Flat Lease
TJX Companies (S&P: ‘A’) had a flat lease for its 1 million square foot build-to-suit warehouse building in Philadelphia. The facility serves as TJX’s principal distribution hub for the eastern half of the U.S. TJX designed this property to fulfill a particular mission-critical role within its organizational structure.
VEREIT’s Asset Management team worked with TJX on a “blend and extend” whereby the tenant agreed to extend the original flat lease 20 years with annual rental increases. Through this transaction, VEREIT reduced transaction costs by not paying leasing commissions or contributing to tenant improvement costs, while extending the lease – with annual rent increases – that mutually benefits both parties.