A 1.2-million-square-foot suburban industrial portfolio being hawked by Colony Realty Partners may find an almost empty investment field for several of the properties – a telling indicator of the relative weakness of the local industrial market.
The high-bay warehouse, flex and office space is spread among six buildings in the Forge Park industrial park in Franklin and two properties in Myles Standish Industrial Park in Taunton.
Some brokers, investment experts and other industry executives said the property could yield between $70 and $90 million. And it’s rumored Colony will break the buildings into two distinct groups to make them more attractive as package deals.
If that happened, it would likely entail bundling 22 Forge Park with 800 John Quincy Adams and 275 John Hancock roads in Taunton in a high-stud warehouse package, according to one broker familiar with the plans. The other would likely contain 8, 9, 10, 15 and probably 20 Forge Park into a manufacturing/flex space package. Colony officials did not return calls seeking comment.
But even if Colony did get $90 million – the high end of analysts’ estimates – the firm would still take a beating on the price. According to industry tracker CoStar, Colony bought the six Forge Park properties for $67.8 million in 2007, at the height of the market. Also in ’07, Colony purchased 275 John Hancock Road and 800 John Quincy Adams Road for $38.7 million. That’s a grand total of $106.5 million.
Best And Worst
The properties themselves are a mixed bag. Looking at 22 Forge Park, one broker that deals in industrial product said it’s one of the “best high-bay warehouses in the Greater Boston industrial market.”
But there are also some serious drawbacks to the properties. The warehouse at 800 John Quincy Adams Road is flawed, brokers say. It’s an L-shaped building, and corners are never good for shipping and receiving. The building lacks sufficient bays and is “a quirky building,” in general, according to a source that asked for anonymity.
And at 15 Forge Park, a 65,000-square-foot property, the tenant that leases the entire building, military contractor Qinetiq, has been out in the market considering space at other properties, sources told Banker & Tradesman. The company’s Forge Park lease expires in 2013. The tenant could certainly extend, but only time will tell.
“I think that would … definitely affect somebody’s view of the investment,” said one industry executive. “[Whether] it will be a popular portfolio or not is a really good question.”
Then there’s the fact that three of the buildings are flex space, and currently, investors have cooled on flexible R&D space of that sort, sources say.
“Industrial is just not a popular asset class for institutional investors right now,” but that’s the audience for a portfolio like Colony’s, according to another source that asked for anonymity. “Boston’s not a major industrial center. [Boston’ doesn’t] have a ton of product coming in and being distributed. The industrial market here is high-tech computer hardware and software development and medical device development.”
There has been a recent buying spree on industrial assets. But those have been mostly owner-occupier purchases – not the kinds of properties or buyers that would invest in Forge or Myles Standish industrial parks, according to sources.
On the bright side, the properties are more than 90 percent leased, so the assets are stabilized by any standard. And despite investors’ potentially tepid appetite for the industrial asset class as a whole, “These are some of the best industrial assets out there, so they’re likely to remain well-occupied for years to come,” said one investment advisor.
