[caption id="attachment_196376" align="aligncenter" width="1200"] The Amazon fulfillment center in Middletown was recently sold by a California investment firm, making a 30% return on investment for the 1 million-square-foot warehouse. | DBT PHOTO BY JACOB OWENS[/caption]
MIDDLETOWN – The Amazon fulfillment center in Middletown, the e-commerce giant’s first major center in Delaware, recently traded between investment firms for $118 million, demonstrating the strength of real estate tied to the company.The fulfillment center known within Amazon as PHL7 located at 560 Merrimac Ave., which kickstarted an enormous boom of growth in southern New Castle County, is the third mega sale of an Amazon-linked building in Delaware this year – all of which now rank in the Top 3 sales for the state.In February, an Australian real estate investment firm acquired the recently opened Amazon Boxwood plant, which is Delaware’s largest building, for a record-setting $392 million. Just a few weeks later, Dermody Properties sold its smaller, neighboring Amazon delivery center for more than $97 million.Now leap-frogging that sale is the July 15 deal between Los Angeles-based investment firm Circle Industrial and a joint venture by Virginia-based American Real Estate Partners and New York-based investment firm Machine Investment Group (MIG), according to county land records. The $118 million sale translates to a cost of more than $114 per square foot. The state received a $2.95 million cut of the deal’s realty transfer tax while Middletown got $1.77 million.MIG, founded by former senior executives from Garrison Investment Group, focuses on “opportunistic, distressed and special situations across the United States.” The firm did not reply to a request for comment about the recent acquisition.AREP focuses on a value-add and opportunistic strategy, concentrating on data center, residential, industrial, and office assets in East Coast urban and urbanized suburban markets. It confirmed its involvement with the sale in a July 26 public statement after Delaware Business Times published this story.“At AREP, we have sought to invest in those markets where we see growth of both tenancy and rents,” said Doug Fleit, co-founder & CEO of AREP, in a statement. “We were drawn to this asset in a growing market as demand from logistics & distribution companies along with [third-party logistics] providers continue to lead market absorption.”Circle Industrial acquired the fulfillment center for $91 million in 2015 from Indianapolis-based Duke Realty, a publicly traded real estate investment trust that specializes in the development of warehouse and industrial properties. That means Circle Industrial saw a sale-to-sale return on investment of about 30% after seven years. A company official did not reply to a request for comment on the sale.The more than 1 million-square-foot PHL7 fulfillment center – the company’s second in Delaware after its New Castle center was one of the company’s first to open back in 1997 – cost about $90 million to build when it opened in 2012. Today, it employs several thousand people.Amazon’s original 12-year lease for the property is set to expire in 2024, although it holds four additional renewal options that could see the lease extended up to 20 more years, according to land records.The state awarded Amazon $3.47 million from the taxpayer-backed Strategic Fund to support the expansion, of which $2.12 million helped create new jobs at the site and $1.35 million backed the capital expenditure. A separate grant for up to $4 million from the Delaware New Jobs Infrastructure Fund improved roads and traffic infrastructure around the warehouse, while Middletown approved a real estate tax abatement that was set to expire this year.The arrival of Amazon brought new attention to Middletown as a growth area for Delaware, leading to projects by medical supplier Datwyler, auto battery distributor Clarios, alcohol distributor Breakthru Beverage and soon a mega pharmaceutical campus by WuXi STA.