Case Study

Summary

Auburn Logistics Center is located in the middle of the Puget Sound’s Kent Valley industrial market in Auburn, WA. The property is situated upon 45.6 acres of land consists of two large warehouse buildings totaling 885,333 SF. The city of Auburn is strategically located between the ports of Seattle (28 miles) and Tacoma (13 miles), with good access to Sea Tac International Airport. The project benefits from 30’ clear height, ESFR sprinkler systems, and large yard areas for trailer storage. Given the overall size of the property, it is one of the largest logistics facilities of its kind in the Pacific Northwest.

Situation

  • The property was acquired in 2004 by a pension fund advisor.
  • The owner acquired the property with Building A leased to UPS (616,827 SF) and Building B leased to Lowes (268,506 SF).
  • Lowes decided to vacate the property, and owner leased the entirety of Building B on a long term basis.
  • During early 2010, the owner was concerned with the lease expiration of UPS in 2012 and made the decision to sell the property concurrent with completing the improvements for ULine.
  • Due to UPS’ Right of First Refusal to buy the property and an environmental situation at the property, the seller hired a broker to market it to institutional investors on a limited basis.
  • The property was initially awarded to another buyer, at a price above Orchard Partners’ price. However, the property fell out of contract and was awarded to Orchard Partners in Sept. 2010.
  • During due diligence, UPS waived on its purchase option of the property and released an RFP for 250,000 SF in order to downsize.

Results

  • Concurrent with characterizing the site’s environmental history, Orchard Partners confirmed there to be a scarcity of available alternatives for large warehouse users within the Kent Valley.
  • Orchard Partners’ had assumed that UPS would vacate the entirety of Building A, and hired a broker to proactively solicit interest on the part of a few large corporate logistics requirements.
  • Orchard Partners developed several re-tenanting scenarios of Building A prior to due diligence, but determined that the highest value would be created through marketing it to a single user.
  • Prior to closing, Orchard Partners confirmed through Phase II testing that the property had no significant environmental issues.
  • Prior to closing, Orchard Partners confirmed that it had adequately budgeted for deferred maintenance of the property, including truck court repaving, renovation of office space, demolition of mezzanine office area, partial roof replacement of Building A, seismic retrofit of Building A, and upgrading the half of Building A to ESFR sprinkler system.
  • In 2011, the purchase was the largest industrial investment in the Pacific Northwest, and to several brokers and investors, marked the bottom of the industrial market in Seattle.
  • Following closing, strong interest from large corporations to lease Building A continued, coinciding with ownership’s decision to renew UPS for the entirety of Building A for five years – the largest warehouse lease in the Pacific Northwest in 2012.
  • After 10+ years, worked with ownership to purchase 6.11 acres of land adjacent to the north side of UPS building in order to facilitate a lease renewal and the potential addition of a new truck court area with more dock-high doors and trailer stalls.