HAMMOND, LA-A Chicago-area investor has been named the stalking horse bidder for a 700,000-square-foot industrial facility in receivership.

The 1980s-era property, located at 301-511 Pride Dr., is part of a portfolio previously owned by Wextrust Capital. In September 2008, Wextrust executives were charged with fraud for operating a Ponzi-like scheme. Since then, the company and its assets have been in receivership.

Although a stalking horse contract has been executed, the sale process being conducted by Northbrook, IL-based Hilco Real Estate allows for “higher and better” offers to be submitted by sealed-bid auction for a period of 60 days, according to Geoffrey Schnipper of Hilco Real Estate.

The auction will close on July 15, 2010. In order for a bid to be considered qualified and competitive, it must meet or exceed the minimum bid of $26 million.

The building is 95% leased to five tenants: Entergy, Dupont Performance Elastomers, Liquid Container, Penske Truck Rental and Victory Packaging. The property’s two largest tenants recently signed five year extensions on their respective leases. The 2010 net operating income for the property is projected to be in excess of $2.5 million.

WexTrust Capital acquired the property in 2007 for $28.4 million. Originally built by a regional supermarket chain as a distribution center, the complex includes 471,127 square feet of office/warehouse space, 207,872 square feet of freezer and cooler space, a 20,604-square foot office building and an 11,000-square foot truck-maintenance building.

Situated 45 miles east of Baton Rouge and 55 miles northwest of New Orleans, the property offers easy access to Interstates 10/12 and 55. It also features rail service by Canadian National Railway via a city-owned dedicated short line.

The property has an assumable CMBS mortgage in place in the amount of $23.5 million, which does not mature until 2017. With the property’s attractive assumable debt, a conservative underwriting of its pro-forma shows a leveraged internal rate of return in excess of 34%, according to Schnipper tells GlobeSt. Given that many opportunity funds expect leverage IRRs in the high-teens, the firm hopes to receive a positive response from the market place and to generate multiple bids.

While the property is an income-producing investment, it may offer additional upside. Its tenant, Liquid Container produces containers for The Folgers Coffee Company, which recently announced that it will expand production and capacity at its New Orleans-area manufacturing plants and distribution center as part of a $220 million effort to cut costs and improve efficiency.

"The Folgers announcement is a very positive development for the area in terms of state incentives and jobs, and it will likely have an impact on this building as well," Schnipper says. "Leases at this facility have been structured so the new owner can accommodate an expansion when [Liquid Container's] production capacity needs to be increased."