Value Creation Through Direct Lease with Subtenant

Kennesaw, GA

Background & Challenge:

  • 80,00 square foot, single-tenant, traditional office building in Kennesaw, Georgia (Atlanta MSA) occupied entirely by the current tenant until March 2028.
  • The current tenant listed the space for sublease in October 2022 and indicated intent to operationally decommission the building in January 2024.
  • Orion engaged a local Broker to market the property directly to leasing prospects.

Resolution:

  • A prospective tenant who is a leading provider of services and products in printing and media, was attracted to this property’s size and configuration for its upcoming leasing requirement.
  • Orion agreed to add a loading dock for deliveries and light distribution and contribute capital concessions to build out the prospect’s showroom for its printing equipment.
  • Subsequently, the prospect executed a sublease with the current tenant, followed by a direct lease with Orion at market value rents commencing upon expiration of the sublease.

Benefits:

  • Orion secured a new, full-building lease commitment from a creditworthy tenant for a duration extending well beyond the in-place lease term, eliminating near-term vacancy risk and stabilizing asset value.
  • The new tenant will transform the subject property from a traditional office to flex/industrial and ultimately convert the property to dedicated use asset.

Portfolio Value Creation Through Capital Recycling

Northbrook, IL

Background & Challenge:

  • The property is a 75,000 square foot single-tenant corporate headquarters and R&D facility in Northbrook, Illinois. The building was originally constructed in 1995 and has undergone substantial renovations including a 2010 gut rehab and subsequent upgrades.
  • The property is 100% occupied on a net lease to tenant for a 10-year term.
  • Tenant is U.S. subsidiary of a multi-billion dollar, privately held global food/pasta company. The Property serves as tenant’s headquarters for the America Region and includes the lone R&D/test kitchen facility in the U.S.

Investment Highlights:

  • The property is located in Northbrook, a high-income community on Chicago’s North Shore. The surrounding area is characterized by strong demographics, a concentration of executive decision-makers and limited competing flex inventory.
  • More than half of the building is dedicated to research & development, pilot plant, and test kitchen space, creating a specialized, mission-critical facility with significant tenant investment.
  • Orion purchased the property at an attractive capitalization rate on in-place NOI, relative to the long-term nature of the lease, quality of underlying real estate and tenant creditworthiness.
  • The property benefits from direct visibility from and access to Interstate 94, enhancing the site’s desirability, usability, and future residual value.

Benefits:

  • Acquisition extends Orion’s WALT with the addition of a high-quality global food company to the tenant roster.
  • Orion acquired the asset at a basis well below replacement cost, particularly given the magnitude of historical capital expenditures invested into the property by both landlord and tenant.
  • Specialized nature of the building’s improvements , the site’s location within a gateway market in the central U.S., and the tenant’s operational reliance on the facility suggest a higher-than-normal probability of renewal at lease expiration.
  • Further, the asset provides long-term downside protection on account of its flex configuration and positioning within a submarket where there is durable tenant demand for HQ/R&D space tied to food innovation and product development.