Wharton Industrial Closes Out Banner Year in 2020,with Deal Activity of Nearly $300 Million
Flurry of sales, leasing and acquisition activity highlight company’s success in increasingly competitive, tech-driven industrial sector
NEW YORK — Wharton Industrial, a leading investor and developer of warehouse and logistics properties, is pleased to announce the success of its portfolio in 2020, with deal activity totaling nearly $300 million.
Overall, leasing at Wharton Industrial warehouses in 2020 was well in excess of 1 million square feet, and the company sold three properties for aggregate proceeds of more than $200 million. In addition, the company expanded its pipeline with the acquisition of a 32-building. 1.1-million-square-foot portfolio of warehouses in southern New Jersey.
These successes come just three and a half years after Wharton Equity Partner’s founder, Peter C. Lewis, decided to pivot from investing in multifamily properties (selling its $500 million portfolio), forming Wharton Industrial in late 2017 to capitalize on the secular growth of e-commerce and related demand for warehousing and last-mile delivery space.
“For more than three decades, we’ve become known for proactively identifying market demand to stay ahead of the curve, and to make concentrated bets on our convictions; our early entrance to the industrial space is now bearing fruit,” said Mr. Lewis. “As e-commerce and other forms of technology continue to change our society, the industrial market is the primary beneficiary, and we expect the amount of opportunities in this sector to swell. With the introduction of robotics and other forms of innovations that enhance industrial operations, the lines between real estate and tech are beginning to blur, and this will position forward-thinking investors as uniquely capable custodians to offer substantial returns to their investors.”
Wharton’s major successes in 2020 included:
SoPhi Logistics Center — Philadelphia, Pennsylvania
In 2019, Wharton was presented with the opportunity to invest in a run-down former subway repair facility in South Philadelphia. Despite the building’s dilapidated physical state and the inconvenient presence of rail lines inside the property, Wharton recognized the property’s immense potential if reimagined into a first-class facility that could help meet the wave of demand for last-mile fulfillment space within the urban core. While the property was passed over by many other investors, Wharton was confident in its assessment and brought in institutional equity partner Walton Street Capital to purchase the property for $16.75 million.
The next 14 months brought a flurry of activity at the 283,000-square-foot property, with a complete overhaul to the building, roof, floors and parking lots. After transforming the crumbling eyesore into a state-of-the-art, technology-equipped e-commerce facility — now branded SoPhi Logistics Center — Wharton signed Amazon to a long-term lease in June and sold the property to GLP Capital Partners for $71.4 million. As a result of the low basis at which Wharton acquired the blighted property and the efficiency of execution, the deal registered an IRR above 200%.
Florida Crossroads Logistics Center — Ocala, Florida
In July 2020, Wharton and its partners, Westport Capital and Red Rock Developments, sold Florida Crossroads Logistics Center, a 617,000-square-foot logistics hub in the Central Florida city of Ocala, to Lexington Realty Trust, a NYSE REIT, for $58.4 million. Upon completion of the property in June 2020, the facility was fully leased to Amazon, helping pave the way for its sale.
Consistent with Wharton’s philosophy of trying to see ahead of its competition, Ocala was an untested market for big box spec industrial development prior to this project. However, given its central location and proximity to 14 million consumers and an abundant labor pool, Wharton felt comfortable in taking a calculated risk and was rewarded when it delivered a logistics property to meet the needs of the largest global e-commerce company. This transaction also proved the success of this sort of spec industrial development, with an IRR north of 40%.
32-building portfolio — Pennsauken, New Jersey
In June, Wharton closed on the acquisition of a portfolio of 32 last-mile warehouse properties in Southern New Jersey, comprising approximately 1.2 million square feet of space. Sourced off-market through Wharton’s strong relationships, the portfolio was acquired at a very favorable basis — well below replacement cost — by Wharton and equity partner, Walton Street Capital. In a supply-constrained market within the country’s eighth largest MSA, this portfolio will provide a significant opportunity to create value as leases roll.
Shugart Farms Phase II — Palmetto, Georgia
Originally purchased by Wharton, Starwood Capital and Red Rock Developments in late 2017, this 988,000-square-foot, suburban Atlanta property was developed speculatively with an eye toward landing a premier tenant upon completion. Once construction had concluded, Wharton signed PVH Corp. — the noted apparel company that sells brands Tommy Hilfiger, Calvin Klein and IZOD — to a 20-year lease for the entire building. With a long-term tenant in place, the partnership attracted the interest of Granite, a Canadian REIT, and sold the building in November for more than $80 million, culminating a successful deal that generated a gross IRR approaching 30%.
About Wharton Industrial
Wharton Industrial, a platform company of real estate investment firm Wharton Equity Partners (formed in 1987), is a leading investor and developer of industrial real estate, with a robust pipeline of properties across the Eastern Seaboard, central and south Florida and the southeast US. Steered by the company’s forward-thinking leadership team, Wharton has been a trendsetter in the industrial sector since 2017, developing last-mile distribution facilities in proximity to major urban markets as well as big box spec development projects in the southeast. Wharton Industrial is a platform company of Wharton Equity Partners, an innovative real estate investment firm with extensive experience acquiring, developing and operating a wide range of real estate asset classes. Before shifting to building out its industrial platform, Wharton Equity Partners was an early mover in secondary-market multifamily investment, where it amassed a large portfolio of value-add apartment properties across the South and Midwest, which it ultimately sold for an IRR well more than 20%.