In October 2017, the O’Donnell Group (“O’Donnell”) launched an offering for a 313,000 square foot distribution warehouse repositioning opportunity located adjacent to I-695 in Baltimore, Maryland.
The property had an excellent in-fill location between the BWI Airport and the Port of Baltimore and was being acquired below replacement cost. IKEA, the property’s sole tenant, was vacating on October 31st and O’Donnell was leveraging the IKEA vacate to structure an advantageous acquisition of a soon-to-be vacant, but primely situated warehouse in order to reposition it into a multi-tenant property.
The business plan included repositioning the asset, leasing it, and subsequently selling it within two to three years. O’Donnell planned to add new dock doors, paint, modernized office areas, slurry sealed asphalt, and landscaping. O’Donnell conservatively anticipated leasing the building to three different tenants within 18 months of closing.
All Site Work Completed & Fully Leased
O’Donnell informed investors that all the site work was completed in early 2019 as anticipated. Work was continuing on the building facade upgrades with a scheduled completion by mid-June 2019. Extension of the sewer and water service inside of the building for additional tenants was due for completion by mid-May and electrical upgrades for additional tenants were scheduled for mid-June 2019. A new tenant was taking possession of the 74,401 square foot vacant space on June 1st and O’Donnell was in negotiations with a current tenant to take over the remaining 83,731 square feet. In Q2 2019, the current tenant took possession of the space and the project became 100% leased ahead of the business plan.
Potential Sale & Refinancing
In Q4 2019, O’Donnell announced that the property was listed for sale and investor interest was strong. First round of offers had been received, which were in excess of the initial projections. A Q2 2020 closing was expected; however, due to the COVID-19 environment, the buyer requested an 11% reduction in purchase price. O’Donnell did not feel compelled to sell the property at a discount given two very creditworthy tenants and debt in place. Consequently, O’Donnell refinanced the property in Q3 2020, which resulted in a new loan with lower fixed interest rate and a lower monthly debt service payment. Additionally, the refinancing produced a meaningful cash distribution which was used to pay down accrued investor preferred return through Q2 2020, bringing cash-on-cash return to investors to 9.59% as of that point.
In Q4 2020 O’Donnell received an attractive offer for the property and in February 2021 the sale transaction officially closed at a sale price that exceeded original projections.
A favorable product type and good business plan execution allowed O’Donnell to develop a strong tenant base and successfully navigate through uncertainties of the COVID-19 environment. O’Donnell exited the investment after an approximate three year hold, achieving positive, albeit lower-than-projected returns for investors.
*Net of the most onerous fees charged to clients of CrowdStreet Advisors, LLC, our registered investment advisor subsidiary; an investor’s actual returns on a realized investment may differ.
This report contains explanations of a series of events associated with the E-Commerce Industrial Baltimore offering that resulted in an approximate 12.4% (net of most onerous fees) IRR 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.
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