Industrial prospects rose in 2022
The pandemic was no villain to the industrial market this year.
As consumers turned to online shopping, retailers followed suit. Speculative industrial developments dominated the first half of the year throughout Twin Cities suburbs, and investors hopped in where they could.
Blackstone’s industrial arm Link Logistics, Scannell Properties and Nuveen were especially active in the industrial space. Artis REIT’s massive $324 million sale included the disposition of six industrial properties in the Twin Cities and a New York office for $74.8 million to Nuveen.
Tenant demand remained high throughout the year and development isn’t expected to outdo the pace of demand next year – meaning that industrial could remain a solid investment. However, rising interest rates have begun to cloud some of the optimism that peaked this year in industrial assets.
Out-of-state investors dominated the market. The California real estate company Orton Development marked the top spot for individual sales with its purchase of a Best Buy warehouse in Bloomington.
Here’s a look at some of the top industrial transactions reported by Finance & Commerce this year.
Portfolio transactions
Artis REIT sales
Price: $324 million (combined)
In the biggest transaction of the year, Canadian investment firm Artis REIT sold two industrial portfolios for $324 million.
A 17-property portfolio went for $248.9 million to a joint partnership of Edina-based Capital Partners and Investcorp, a Bahrain-based investment firm. Chicago-based Nuveen bought the other portfolio, which includes six industrial properties throughout the Twin Cities and an office in New York totaling $74.8 million.
The first portfolio includes about 2.5 million square feet of leasable area and breaks down to $100 per square foot. The properties are scattered throughout the metro.
Scannell warehouse sale
Price: $137.37
Scannell sold five warehouses for $137.37 million in February to Nuveen Real Estate, an arm of New York-based financial planning firm TIAA. Most of the properties were developed by Scannell last year. The buildings are in Maple Grove, Brooklyn Park and White Bear Township and are a part of business parks like NorthPark Business Center and an Amazon sortation facility.
Waters Business Center
Price: $37.1 million.
Blackstone sold the six-building Waters Business Center for $37.1 million.
The portfolio totals about 327,400 square feet of industrial tech space. The Waters HM LLC, a joint venture with Hyde Development and Mortenson Properties, bought the properties from B9 Polar Waters LLC, an entity connected to global investment firm Blackstone, the largest industrial landlord in the Twin Cities.
The $37.1 million sale came out to about $113.32 per square foot. It houses tenants like John Deere, Toshiba and Lasermark.
The new owners said at the time of purchase that they planned to rebrand and upgrade signage, add an integrated trail system throughout the park, create a spec suite and demolish an old office space to create a better balance of warehouse to office space, according to an email from Hyde Development CEO Paul Hyde.
Individual sales
Best Buy warehouse
Price: $54 million
Emeryville, California-based Orton Development purchased a Best Buy warehouse for $54 million in December. Chicago-based First Industrial Realty Trust was the seller in the deal.
The building is about 35 years old and is fully occupied by Best Buy, whose headquarters are just five miles away in Richfield. The company executed a 10-year lease extension this year that lasts until April of 2033. Best Buy had recently invested in the conversion of warehouse space into approximately 101,000 square feet of photo studio space and a customer service center along with adding a sprinkler system at an out -of-pocket cost of $11 million dollars. It was considered one of the largest structures in Bloomington when it got an expansion in 2012.
Abbott Laboratories Life Sciences Campus
Price: $53.03 million
The Abbott Laboratories Life Sciences Campus in Minnetonka sold for $53.03 million in July.
Chicago-based Syndicated Equities, in partnership with Minneapolis-based Eagle Ridge Partners, sold the four-property complex to Austin, Texas-based Virtus Real Estate Capital. The quartet of buildings is fully occupied by medical device company Abbott Laboratories as a production space.
The spaces are FDA-approved cGMP clean lab space where Abbott makes medical devices and include office and warehouse space. Syndicated Equities’ Director of Business Development Jessica Healy said, “This isn’t food-grade, this is medical-grade … So the cleanroom space is extremely specialized and extremely valuable.”
Fingerhut warehouse
Price: $51 million
A warehouse in St. Cloud, which houses a distribution center for online retailer Fingerhut, sold for $51 million in March.
San Francisco-based investment firm Farallon Capital Management LLC purchased the property at 6250 Ridgewood Road from Illinois-based Brennan Investment Group. The property spans nearly 82 acres, which seats the 1.2 million-square-foot distribution center. The sale comes out to about $42.60 per square foot. It was built in 1989 and was one of the largest real estate transactions in outstate Minnesota in 2017 when Brennan Investment Group bought it.
Kindeva Drug Delivery headquarters
Price: $48.2 million
The headquarters for Kindeva Drug Delivery sold for $48.2 million in October. Texas-based Virtus Real Estate Capital sold the property to an entity connected to Ohio-based Creative Manufacturing Properties, a life sciences-oriented real estate investment trust. The building is home to a “state-of-the-art” research and development lab, critical support functions and corporate leadership, according to Kindeva’s website. The sale breaks down to $350 per square foot.
Former Spectrum Commerce Center
Price: $35.5 million
Excelsior-based Water Street Partners bought what was once known as the Spectrum Commerce Center in Eagan for $35.5 million. The company plans some big upgrades and a full rebrand of the property. It’s a unique building and thought to be one of the largest recycled material projects in the country.
Starting in 2001, the property was constructed for $37 million using large pieces of pre-stressed concrete that were formerly part of two rental car garages at the Minneapolis-St. Paul International Airport, Finance & Commerce reported in 2013.
This article about Water Street Partners is from Finance & Commerce