FLEX / INDUSTRIAL CASE STUDY
Location: Marietta, GA
Purchase Date: October 15, 2015
Project Returns: 55.07% IRR / 3.36x EM
Years Held: 3 years
Gateway Oaks was a 152,179 square foot four-building business park located a few miles north of the soon to be new Cobb County Atlanta Braves Stadium. Project was originally developed by Trammell Crow and subsequently sold to Clarion Partners who struggled with occupancy since 2010 when a large unit of Home Depot moved out. As a result, the property had significant deferred maintenance. MK Asset Investment put the property under contract at 60% occupancy as talk around a city initiative to revitalize the Franklin corridor was happening. The Mayor of Marietta called a quick vote and a $50 million bond was approved to spur the revitalization.
Solution & Outcome
MK Asset put the property under contract seeing the beginnings of significant investment in the immediate area. The city was ramping up for a vote to approve the bond program which would allow the city to purchase poorly run Class C apartments to raze and then sell the land to a commercial developer or user. MK Asset was also aware of the changes starting to occur in the submarket as a result of the new Atlanta Braves Stadium a few miles to the south. Shortly after taking ownership, the city successfully purchased 75 acres across three distinct land parcels two of which were adjacent to Gateway Oaks. The city razed the apartments and begin a national search for large commercial users. Soon thereafter, the city announced a 35 acre sale to Atlanta’s new MLS team Atlanta United owned by Arthur Blank. Atlanta United would soon construct their training facility and youth soccer grounds. On the heels of this news and an investment in the exterior aesthetic, MK Asset secured a 25,000 square foot lease with a prominent contractor and started its turnaround of the business park through deploying capital for new roofs, parking repairs, significant HVAC and lighting replacement along with inserting a fresh leasing and management team.
In year two, MK Asset solidified 5 significant renewals while the city announced the sale of another large parcel to IKEA for their second Atlanta store. Gateway Oaks now sat in the epicenter of the revitalization of the Franklin Road corridor. MK Asset successfully landed another 25,000 square feet of new leases with increasingly quality credit tenants and sold the asset in an off market transaction in October 2018. In two and half years, MK Asset increased occupancy 29% while also extending term and enhancing the quality of the tenancy.
Gateway Oaks is a perfect example of capitalizing on the market imperfections of real estate. MK Asset successfully handicapped known and rumored future variables on an investment allowing a purchase of the asset well below replacement cost in a rapidly changing market.