$37M Buys 750,765-SF, Tex-Mex Portfolio

SAN ANTONIO-Dallas-based Macfarlan Capital Partners and local firm, Titan Industrial Development LLC, have cut a $37-million deal for 750,765 sf of industrial space concentrated along the Texas-Mexico border. The dual-pronged, four-city deal puts a new equity partner at Titan's side and closes out one of Macfarlan's funds.

The nine-property portfolio was assembled by rolling in two properties in San Antonio's Blossom Cove in an off-market addition for an out-of-the-box investment strategy to outmaneuver three other competitors in a best-and-final round, PJ Brady, Macfarlan's acquisitions manager tells GlobeSt.com. "We folded it in to optimize our return to our investors," he explains. Some 1,300 investment advisers today will be privy to the inside details when Macfarlan discusses the specialty play on the opening day of the National Association of Personal Financial Advisors' 2006 convention at the Gaylord Texas Hotel & Conference Center in Grapevine.

The portfolio properties, averaging 12 years old, are 87% leased. The northernmost piece is situated in San Antonio's airport submarket. It's also the largest concentration of space in the pack--flex buildings in 137,858-sf and 165,506-sf footprints. The second-largest concentration sits in El Paso, 263,106 sf in four buildings, also in an airport submarket. Right across the Texas line, the partnership play reeled in a 70,000-sf structure in Santa Teresa, NM. The remaining assets are 76,574-sf and 37,721-sf buildings in McAllen, right at the base of the only commercial traffic international bridge in the border city.

"The properties are on direct paths that come from both ports [Manzanillo and Lazaro Cardenas, Mexico] and many are in foreign trade zones," Brady says. The assets, which will continue to be leased and managed by Titan, have 85 tenants ranging from 1,200 sf to 50,000 sf. "There's no much rollover, but we do have vacancies for some upside potential," he explains. "That's why we targeted this."

Macfarlan executive Barclay Nelson says the closed-out fund targeted special situations like distressed properties, innovative investments and recapitalizations. The just-bought package falls into the special situation and innovative categories due to vacancy and strategic positioning in the Nafta Corridor supply chain.

Brady says the two Mexico ports are becoming the favored trade route for the Far East due to Long Beach, CA's backed-up port conditions. "We're taking advantage of that," he says. "And, it's going to continue to grow because this is the second easiest trade route next to Long Beach for the Far East." The partnership's assets sit along routes used by roughly 73% of the US-Mexico trade.

Brady says the Titan deal was sealed with a six-year primary term loan, which locks in a fixed-rate interest in the second year, and includes a 30-year amortization. He says the exit strategy for the anticipated six-year hold is aimed at the growing mass of institutional buyers now interested in Tex-Mex properties. "Ten years ago, the biggest fear would have been whom would we sell it to," he says. "Today, institutional-type buyers are looking at these smaller markets."