Sale helps two market segments

March 25, 2011
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An investment group recently purchased a 450,000-square-foot industrial building in Lowell, and that single sale could mean that the revival of two segments of the real-estate market is gaining steam.

“It was an investment sale, meaning it was sold to a group of investors to become the new landlord,” said Derek Hunderman, vice president and managing partner of Colliers International West Michigan, which brokered the sale. “What made it interesting was it’s the largest building in Lowell, bar none.”

But  Hunderman said what is most interesting to him about the sale is it shows that investment activity in the area’s industrial market is “alive and well,” after a roughly 18-month drought.

“It wasn’t until recently that you saw investors coming back into the marketplace. And more importantly, investors are able to find financing,” he said.

Hunderman pointed out that, until recently, an investor hadn’t been able to secure a loan for a purchase because of the economic conditions that led to a host of foreclosures and to a tightening of lending. He said it’s usually been easier for a buyer who is going to occupy a building to find financing than for one who isn’t moving in. But Lowell Ventures LLC, a Grand Rapids firm, was able to do that in its deal with the AW Corp., part of Steelcase Inc., for the Lowell plant.

“For someone who is going to buy a building and live in a building, financing is pretty fluid right now and pretty accessible. But for an investor to be a landlord, it’s not a sure thing. So it’s encouraging to see it pick up like that,” said Hunderman.

Hunderman believes the economic turnaround has taken hold in two segments, while other sectors are still stuck on a waiting list. The investment market is a segment that he feels has begun to come out of the doldrums.

“There is significant motivation behind the investor community, and it is trying to take advantage of the pricing that is out there right now,” he said.

The area’s industrial market is another sector Hunderman said has climbed out of the economic trench. “That’s the next segment that is leading the charge. Our industrial segment is pretty healthy and pretty robust,” he said.

He said Lowell Ventures LLC doesn’t plan to sell the building any time soon; the investment group plans to lease space in the mostly filled building. “Their intention is to keep those tenants in place and attract more,” he said. “In essence, they bought an asset that produces some cash flow today because they’ve got tenants in place that pay rent.”

Colliers International/WM President & CEO Duke Suwyn said the building’s price tag fell by about 30 percent from the pre-recession days to the time of the sale, which was a few weeks ago.

“The key is that if you look at the obstacles to this facility, it’s a large facility in a small market, and that’s a little bit of a negative to it. You have one tenant in there that has a pretty commanding share of that facility and as this market started deteriorating over the last few years — as with everything — the large tenant began taking more and more space,” he said.

Suwyn said that large tenant is Brunswick, which bought the Attwood division of Steelcase about six years ago. The plant was built for Attwood, a maker of boat parts and plastic injection molds. The firm began doing work for Steelcase, which ended up buying Attwood. In the meantime, Steelcase held on to the building after it sold Attwood to Brunswick.

Lowell Ventures LLC bought the building from Steelcase, and four tenants, including Brunswick, lease about 90 percent of the building. The sales transaction has closed. A sales price wasn’t revealed.

“They love the location. It’s close to their employee base. It’s a great environment. It’s a great facility. They’ve got an entrepreneurial group over there that’s attracting business. They’ve been taking business from Oklahoma and, I think, from Alabama or Georgia. They’ve taken on some additional opportunities as some other locations have been shut down,” said Suwyn of Brunswick.

“What’s neat with this, as with any of these (sales), the local community has been very supportive and accommodating to keep this plant full and also to make it an attractive acquisition for a buyer,” said Suwyn of the city of Lowell.

Colliers International/ WM brokered two other industrial sales recently. Gruhop Properties LLC bought nearly 10,000 square feet of space at 514 Lincoln Ave. in Holland from Urban Youth Ministries, and Tooling Systems Group Inc. bought 167,000 square feet at 507 Plymouth NE in Grand Rapids from the Dematic Corp.

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