| Operation Fort: Multi-Building Portfolio…Created With a Twist | ||
| Background: | ||
| Digital Angel Corporation was the parent company of Destron Fearing who operated out of an 80,000 square foot facility in South St. Paul, Minnesota (consisting of two buildings connected by an enclosed passageway). The facility served multiple levels of the company’s operations including its corporate offices, engineering (R&D), manufacturing and warehousing. | ||
| Digital Angel shareholders agreed to sell its Destron Fearing operations (along with its property) to Allflex. Efficiencies were achieved by Allfex in the purchase and the majority of its newly acquired Destron Fearing operations were consolidated into Allflex’s existing operations. Due to the consolidation the South St. Paul facility was no longer needed…and would be put up for sale. | ||
| Challenge: | ||
| Jake Gerads with Fort Inc. got involved in the sale of the building portfolio during the first quarter of 2014. The commercial real estate market had made steady progress toward a regional recovery, but demand in South St. Paul was sparse and sold comparables still displayed a picture of a depressed market. While the city of South St. Paul was busy rebranding its image, the market was still encumbered by a general stigma which lingered from the recent exit of the infamous stock yards. |
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| The structural components of the building appeared to have been well maintained, but there were physical attributes of the building that would need to be addressed. The roofs were approaching the end of their useful lives, and the majority of the buildings clear height capped out at 14’ which was substantially lower than the general market was demanding for this product type. | ||
| Strategy: | ||
| Fort Inc. adopted a strategy in which a lack of market activity would be combated by increased exposure. It was decided that severing the 80,000 square foot building’s passageway would leave two independent buildings consisting of approximately 25,000 square feet and 55,000 square feet. With this objective in place the target market could be dramatically expanded to three substantially different user groups with different square foot requirements. Armed with the ability to target a large pool of differentiated users Fort Inc. created a communication plan that diffused concerns regarding unfavorable property attributes while emphasizing each property’s specific values. |
| Results: | |
| The marketing plan took hold as activity on the property increased during the transition between Q1 and Q2 of 2014. The strategy allowing for increased exposure paid off as multiple offers were competing for the 25,000 square foot building. The building ownership executed a purchase agreement with Summit Commercial Properties LLC which consisted of two businesses who would cohabitate a portion of the building and lease the remaining vacancy to 3rd party businesses for additional rental income. (The buyers of the 25,000 SF building hired Jake Gerads with Fort Inc. to oversee the leasing of their investment…See the case study titled “Speculative Investment Turned Cash Cow” for more details) | ||
| Interest in the 55,000 square foot building picked up while the buyers of the 25,000 SF building were working through their due diligence. With multiple options to pursue the Sellers executed a purchase agreement on the 55,000 square foot building with Royal Star Furniture who was pre-qualified by its lender and was looking for a quick close. Fort Inc. helped ensure a smooth transition through the due diligence process and the sellers closed on the sale of both buildings in July of 2014. | ||
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| Contact Fort Inc. for a no obligation consultation to learn how we can help you achieve your commercial real estate goals more efficiently. | ||