Memphis, TN

Realized Deal : E-Commerce Distribution Center

Sponsored By O'Donnell Group

Risk Profile
Value-Add
Amount Invested
$1,730,000
Targeted IRR
25.2%
Actual IRR*
10.4%
Targeted Equity Multiple
2.93x
Actual Equity Multiple*
1.31x
Targeted Hold Period
5.0 years
Actual Hold Period
2.7 years

In August 2016, the O’Donnell Group (“O’Donnell”) launched an offering for a three-building, 382,500 square foot, e-commerce industrial center in Memphis, Tennessee. The project presented O’Donnell with an opportunity to purchase an industrial product with stable cash flow and the ability to substantially grow the net-operating-income (NOI) through lease up given that at acquisition trailing 12-month occupancy stood at approximately only 85%. O’Donnell was bullish on the opportunity, citing the potential of the industrial market in Memphis which was continuing to increase with the highest net absorption and lowest vacancy rates in 15+ years, and the favorable location which had excellent access to three interstate highways and the airport. After leasing up the remaining vacancies at the property, the business plan contemplated selling the asset in Years 3-5, depending on the market conditions.

Project Timeline

Distributions Suspended

March 2021

As a result of losing a contract, a tenant occupying a 150,000 square foot unit elected to not renew their lease in March 2018, prompting O’Donnell to temporarily suspend distributions as a direct result of this large vacancy. Immediately upon receiving the tenant's notice to vacate, O’Donnell proactively engaged a large reputable broker to market the vacant space. 

Fully Leased

September 2021

By the end of the third quarter in 2017, O’Donnell had successfully finished leasing the property and occupancy stood at 100%. The last unit totaling 30,000 square feet was successfully divided into two units and leased out to two separate tenants.

Successful Leasing

September 2021

By the end of Q3 2018, the previously vacant 150,000 square foot space was fully leased to a new tenant with tenant improvement work underway. This increased occupancy to 98%. Although a few smaller units would become available within the next 60-90 days, O’Donnell enlisted a large brokerage firm to put together a marketing plan to sell the property once these units were leased. The brokers had already begun marketing these units and reported strong interest and activity from prospective tenants.

Final Outcome

The property was officially sold in May 2019. A favorable product type coupled with advantageous market conditions allowed O’Donnell to achieve strong leasing momentum and fill vacancies as they transpired. This created the opportunity for O’Donnell to exit the investment after an approximate three-year hold, achieving positive, albeit lower-than-project returns for investors.

This report contains explanations of a series of events associated with O’Donnell Group’s E-Commerce Distribution Center offering that resulted in an approximate 31% (net of fees) absolute return on original equity to investors (including those from the CrowdStreet Marketplace). Certain aspects of the report such as dates of major events and the final outcome are easily verifiable while others, particularly underlying reasons behind the sponsor’s business plan execution, are not. 

The report partially relies upon the sponsor’s explanations, the information contained within sponsor-produced quarterly reports, and conference calls. This analysis is not an assertion of independently verified facts but, rather, is for informational purposes only, to convey CrowdStreet’s understanding of what transpired.

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