New 604,500-SF Asset Changes Hands for $30M

PHOENIX-The finish was barely dry on the 604,500-sf Buckeye One when it was sold to Duke Realty Corp. for $30 million. The empty distribution center was developer Alter Group's first construction in its 162-acre Buckeye Logistics Center, but won't be its last.

Patrick E. Gallagher, senior vice president for the Chicago-based developer, says his company's method of staking out land, building on it, then selling upon completion rather that lease-up isn't unusual, especially for large, bulk distribution projects similar to Buckeye Logistics Center. "We've done this in California, where we'll sell these to pension funds, with leasebacks on occasion," explains Gallagher. "But it's different here, being that a REIT bought the building."

Gallagher tells GlobeSt.com that Alter Group marketed the project to a number of companies, but the Indianapolis-headquartered REIT made the highest offer for the 6835 W. Buckeye Rd. asset. "It worked out very well for them," he says. "The value of the building even before it's leased has already increased because replacement costs keep going up."

Gallagher says construction will launch within a week on a 303,000-sf building and ground will break on another 380,000-sf structure in mid-August. Both buildings are scheduled for completion in first quarter 2008, with the total development estimated at $35 million.

The logistics park can support 1.8 million sf of additional space. Its build-out value is expected to exceed $170 million at completion, which should be in about three years.

"We're in the market right now, talking to several institutional buyers about potentially buying these buildings," Gallagher says. "They could be sold even before we finish." He says the team also is soliciting build-to-suit proposals in addition to planning more spec space.

Cushman & Wakefield of Arizona Inc.'s directors Pat Harlan and Steve Sayre are leasing Buckeye Logistics Center. The Alter Group struck a direct deal with Duke for the just-sold warehouse.