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COPPELL, TX-With word on the street about Minyard Food Stores Inc.’s campus sale, the new owner, KTR Capital Partners of New York City, is discussing its first purchase in Dallas/Fort Worth and its plans for the 80-acre footprint. When the dust settles, the 792,394-sf repositioning and 510,000-sf expansion will provide a niche campus with an all-in value exceeding $60 million.

KTR Capital tapped the $500-million Keystone Industrial Fund LP to buy the asset at 777 Freeport Pkwy., which had been marketed by CB Richard Ellis principal Bob Scully and senior vice president Dayton Conklin. With the deal now sealed, it’s time to dig into a value-add plan for a three- to five-year hold, possibly longer.

KTR Capital partner Don Chase says the rail-served campus will be re-branded into a multi-tenant development for industrial users, primarily aimed at the grocery supply chain, after Minyard’s completes its move in the fall to Oklahoma City. Several users were looking to buy Minyard’s 25-year headquarters and distribution center, but backed away from the deal because it had to be sold in its entirety, according to Chase. “Those same users are still out there. They still have a need,” he tells GlobeSt.com. “Those competitors are our prospects now.”

KTR Capital has hired O’Brien & Associates Inc. of Dallas to game out a “cohesive design” for four existing buildings, one of which will be razed, and four that will start to rise in early 2008 on 30 acres, six of which front Freeport Parkway. The developable land was “one of the things that was very attractive to us with this opportunity,” Chase explains. The campus sits one mile north of Dallas/Fort Worth International Airport.

KTR Capital plans to tear down a 9,906-sf truck maintenance building and upgrade the remaining early 1980s-era structures—a 42,804-sf, two-story office at the hard corner of Freeport Parkway and Bethel Road, a 13,927-sf carpentry shop and 792,394-sf distribution center with 201,055 sf of freezer or “wet” space and 524,702 sf of dry space. The new buildings, penciled for delivery in late second quarter 2008, will be a trio of 140,000-sf front-load, front-park designs and 90,000-sf rear-load structure, with a higher office finish because it has freeway frontage. The plan, right now, is to bring the 510,000 sf out of the ground at once.

“We’re taking this one step at a time,” Chase says. “We have a lot of work to do to bring it up to a stabilized property.” CBRE senior associate David Sours and associate Kevin Kelly, who specialize in climate-controlled space, are teaming with Conklin to lease the existing buildings. Chase says the leasing team for the expansion has yet to be picked.

KTR Capital made the all-cash close in 45 days, with a 30-day look to stake its first claim in Dallas/Fort Worth. “This is not an easy asset to understand,” Chase says. “It’s a pretty large deal in a market we wanted to be in.”

But, KTR Capital has bought similar properties in the past year so it’s not a foreign play. In Phoenix, the investment group bought a former Kroger distribution center, pumped significant capital into the retooling, turned the refrigerators back on and leased it to Minneapolis-based Target Corp. In Pompano Beach, FL, the fund did a mid-term sale-leaseback with US Food Service Inc. for its campus at 2800 N. Andrews Ave. Chase says KTR Capital’s past experience helped it to win the Minyard’s deal.

There is a chance that KTR Capital will include more climate-controlled space in the new buildings, but that will be determined down the road. “It’s a pretty rare commodity in Dallas, but it’s very expensive to build,” Chase points out. The upside, though, lies in the rent, which can be 100% to 150% higher than dry space. “We believe the space does command a premium,” he says, adding the campus’ destiny most likely will follow its past as a dedicated hub for the food industry.

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