ALPHARETTA, GA-Confident the demand for new industrial product will be strong again in 2006, locally based Triad Properties is spending $23 million to develop a total 452,000 sf of warehouse space in two area submarkets. The hard construction cost of the projects averages $50 per sf.At the 5.5-million-sf Gwinnett Progress Center, Triad has broken ground on Buildings 100 and 200, a combined $14-million venture in the Northeast Interstate 85 submarket in Lawrenceville, Atlanta's largest. Building 100 will have 152,100 sf; Building 200, 146,800 sf.

Gwinnet Progress Center is a mile north of Highway 316, across from the Gwinnett County Airport. The buildings, at Cedars Road and Progress Center Avenue, are scheduled for completion in second quarter 2006.

Asked why Triad would build spec products in a 505-million-sf industrial market that already has 58 million sf of vacant space and an overall vacancy factor of 11.6%, a company representative tells GlobeSt.com, "We are confident in the Atlanta market and believe that will continue to improve in 2006."

Assisting triad with the construction financing of Buildings One and Two was the Dallas office of Holliday Fenoglio Fowler LP. HFF arranged a $12.6-million, 18-month loan through Merrill Lynch Capital. The adjustable-rate loan carries a 12-month extension option and covers a seven-month construction period and the projected lease-up period. The lender did not disclose the interest rate range but area brokers familiar with the project tell GlobeSt.com the effective rate was under 6%.

Getting the loan itself was a challenge for both HFF and Merrill Lynch, says HFF associate director Kevin MacKenzie. "Finding a lender was challenging, given the high-leverage, non-recourse loan request on a 100% spec development project," MacKenzie says. "In order to allow for the deferral of equity, the loan structure included a 90% loan to cost structure upon close, with a pay-down to 70% loan to cost in month 12 of the term."

MacKenzie says that what sold Merrill Lynch on the financing package was "Triad's expertise in the Atlanta market, the expected quality of the to-be-built assets and the strength of the submarket." He adds, "In the end, Merrill Lynch was able to come up with a creative structure, coupled with aggressive terms to win the deal."

In Clayton County, Triad plans to break ground Nov. 7 on two other spec projects totaling 153,600 sf with a hard construction cost of $9 million. Southfield Commons 100 will have 96,000 sf; Southfield Commons 200, 57,600 sf. The development site is on Johnson Road, about three miles from the Hartsfield-Jackson International Airport.

The projected rent ranges at Buildings 100 and 200 at Gwinnett Progress Center is about $4.50 per sf. At Southfield Commons, the rents will average about $5.50 per sf.