ING Clarion Hunkers Down for Last Call on 1M SF

DALLAS-After two weeks of marketing, 20 offers are on the table with three days to go before the best-and-final call on the 1.3-million-sf Heritage Business Park. The class A industrial trophy is poised to draw at least $85 per sf when the final bell rings.

Josh McArtor, vice president and CB Richard Ellis' point man for the sale, tells GlobeSt.com that the fast-paced marketing of the 137-acre park, spanning Grapevine and Southlake, and short due diligence have the deal on track to close in mid-September. The best and final will be narrowed to seven offers. The New York City-based ING Clarion Partners inherited the package in October 2002 when it bought Dallas-based Crow Holdings' Lion Industrial Trust. McArtor says the seller of record, ING Clarion Lion Properties Fund, plans to deploy the gain into value-add investments elsewhere in the US.

The seven-piece portfolio is one of the largest industrial blocks to hit the market this year in Dallas/Fort Worth. And, McArtor says, it's by far the most elite. "For the industrial world, this is the Number One business park in Dallas/Fort Worth," he says. "To compare this to the office market, it will be like selling the Crescent in Uptown Dallas." The CBRE team includes vice chairman Jack Fraker, executive vice president Randy Baird, associate Conor Feeney and financial analyst Jonathan Bryan.

McArtor says industrial space is averaging $55 per sf at closing tables, but he predicts Heritage Business Park will top $85 per sf. Getting into its nuts and bolts, the business park is 98% leased to 18 tenants, the largest of which is Henry Schein Inc. in 250,000 sf. The average tenant occupies 75,000 sf, with office components ranging from 3% to 50%. The historical occupancy has been 95% or higher, with tenant retention at 75%, according to McArtor.

McArtor says the sweet spot to the deal traits is tenants, on average, have three years left on their terms in a park that's now commanding $4.85 per sf to $5.25 per sf. "People are excited about that," he says, "because they can get the below-market rents to roll to market quicker." In contrast, submarket competitors' bulk space is fetching $3.50 per sf to $3.75 per sf.

As it stands, McArtor says the cap rate is a sub-6% for existing space and 9% if development is factored into the equation or a 7% average over the long term. "My pro forma shows a 38% growth in NOI just from the development," he says. Six of the seven structures are fully leased.

The portfolio's only building in Southlake is the 94,993-sf Heritage 1 at 1100 S. Kimball Ave. The Grapevine properties are the 120,000-sf Heritage II at 1000 S. Nolen Dr.; 352,000-sf Heritage III at 1001 Nolen Dr.; 348,979-sf Heritage IV at 801 Industrial Blvd.; 134,640-sf Heritage V at 900 S. Nolen Dr.; 191,100-sf Heritage VI at 800 Industrial Blvd.; and 74,700-sf Heritage VII at 720 Industrial Blvd.

Local kingpin Trammell Crow Co. and Newark-based Prudential Real Estate Investors built Heritage Business Park's first building in 1997 and its last in 2002. The park is situated at the junction of Texas 114 and 26, directly across the freeway from Dallas/Fort Worth International Airport. The offering includes 28 developable acres, all in Southlake and abutting the high school football stadium. McArtor says the jury's still out if the 28 acres will go with the portfolio or be sold to one of the many local developers who've been circling the vacant land.

"There are benefits to buying the entire property so the buyer can structure a JV or put their own controls on it," McArtor says, adding the list of developers biting at the chomp for the empty dirt will be given to the new owner. As for the main piece, he says it's drawn offers from a "Who's Who" of institutional investors and "three or four private investors who realize the trophy nature of the asset and understand the long-term appreciation of the property due to its location."