Case Study

Summary

234 Distribution Center is located at 6838 South 234th Street in Kent, WA.  The property is situated in the heart of Kent Valley industrial market with convenient access to Highway 167, Interstate 5, and is 10 minutes from the SeaTac International Airport.  Constructed in 1975, the existing warehouse distribution building contains 178,400 SF of which 5,352 SF is ground floor office space. 234 Distribution Center is situated upon 15.3 acres, providing a building coverage ratio of 27%.  The warehouse offers 26 dock-high and 2 grade-level loading positions, and 39 trailer parking spaces.

Situation

  • In 2012, Orchard Partners made an unsolicited offer to acquire the building with the understanding that its single tenant, Labeling Services, would be vacating within six months.
  • Demand for warehouse space within the Kent Valley was beginning to recover from the Great Recession, and this was particularly true for buildings located further north and that contained more than 150,000 SF.
  • Unique to this property was the excess land area of approximately seven acres, that was partially encumbered by wetlands.
  • Thus, the opportunity was twofold: [1] renovate and release the existing warehouse and [2] perform a wetlands delineation and entitle the excess land to expand the building by 125,000 SF.

Results

  • In May of 2012, Orchard Partners acquired the property with Morgan Stanley, and assigned no value to the excess land.
  • Shortly after closing, Labeling Services vacated the property, and a full renovation of the building commenced, including a full seismic upgrade, roof replacement, upgrading the power supply, updating the landscape areas, replacement of the office space, new warehouse lighting and painting the exterior of warehouse.
  • Before the renovation of the existing warehouse was completed, ownership leased the existing warehouse to Starbucks Coffee.
  • Over the next five years, Orchard Partners worked with its consultants completed the following: [1] wetlands delineation, [2] wetlands permit through the Nationwide Program, [3] SEPA approval and [4] building permit to construct a new warehouse of 125,440 SF.
  • Shortly after the new warehouse was completed, ownership leased the warehouse to a new tenant for rents well in excess of its original underwriting.
BEFORE

Overview