- Investment Sales & Capital Markets
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Foundry executed a seamless launch to market, exposing the property to a list of qualified local and national investors.
Foundry’s IAG represented Atlanta Property Group, a private equity investment company interested in selling their 219,767 SF industrial site located in Portland, TN. They had recently acquired the property after a lease was negotiated for a new tenant to occupy the entire property.
Foundry executed a seamless launch to market, exposing the property to a list of qualified local and national investors which resulted in over 200 prospective buyers starting to underwrite the opportunity. After a call for offers Foundry solicited 5 offers, creating competition between the parties. After hosting a best and final offer round, the sellers selected a buyer.
When negotiating the purchase and sale agreement, the capital markets climate at the time had a lot of uncertainty due to the Federal Reserve making significant increases to interest rates to try and curb inflation in the economy. The buyer had concerns about interest rate risk, and significant negative leverage, as they required debt to purchase the property. As such, they proposed discounting the purchase price to hedge against future interest rate changes.
Foundry’s IAG team introduced colleague J.C. Tacot on Foundry’s Debt & Structured Finance platform to help advise the seller on the then-current debt market environment. J.C. also was able to help source debt for the top buyer prospects, which allowed for greater transparency for the sellers through the ensuing negotiations.
Foundry helped the seller and the selected buyer negotiate for a potential adjustment to the purchase price based on a specific interest rate increase above a predetermined and mutually agreed upon baseline rate. That priced adjustment was also capped, which minimized the risk for the seller.
The buyer was able to lock in an interest rate lower than the agreed upon baseline rate, so ultimately there was no price adjustment needed.
The property successfully closed at the original price offered by the buyer, which represented a 5% cap rate. Because the cap rate was low compared to prevailing interest rates, the transaction did result in negative leverage for the buyer. However, the buyer was confident in achieving higher rental rates upon tenant renewal and that they could refinance the property in the future once rates start to drop again.