NEWPORT – An Australian real estate investment firm has acquired the recently opened Amazon Boxwood plant, which is Delaware’s largest building, for a reportedly record-setting price. Macquarie Asset Management Real […]
[caption id="attachment_220674" align="aligncenter" width="1200"] The DGI3 Amazon Boxwood delivery center in Newport is one of the company's largest in the greater Philadelphia region. | DBT PHOTO BY JACOB OWENS[/caption]
NEWPORT – Just a few weeks after its showcase Boxwood sortation center sold for a state record sum, Dermody Properties has sold its smaller, neighboring Amazon delivery center for more than $97 million, which would rank the state’s second largest single-asset sale in the past decade.The 220,000-square-foot delivery center, known to Amazon as DGI3, opened in September in tandem with its larger companion facility. It employs more than 300 people who work to prepare 50,000 packages daily to pack into the vans that make deliveries to customers’ doorsteps.
[caption id="attachment_220676" align="alignright" width="300"] Linda Hill, owner of MDD3 Logistics LLC, helps a driver pack his van outside of the DGI3 Amazon delivery center in Newport. | DBT PHOTO BY JACOB OWENS[/caption]
The e-commerce giant signed a 15-year lease on the delivery center in February 2021, according to county land records. The lease contains five additional renewal terms of five years each, meaning that if fully executed, Amazon could remain at the facility under the current lease until 2061. Each of the renewal periods are set at 95% of fair market value and Amazon holds the right of first offer to buy the site should the owner ever want to exit the property.The sale was more a shuffling of Nevada-based real estate investment and development firm Dermody’s investment portfolio than a traditional sale. It sold the facility from one investment fund to another that it formed in December as a joint venture with French investment giant AXA Investment Managers.It did, however, result in a public deed transfer from one LLC subsidiary to another, revealing the purchase price of just over $97 million as well as real estate transfer tax payments of more than $1.4 million to New Castle County and $2.4 million to the state. The sale would translate to a nearly $440 per square foot price.In contrast, Dermody sold the controlling stake of its LLC connected to the 3.7 million-square-foot MTN1 Boxwood sortation center to Macquarie Asset Management, an Australian investment giant, which did not result in such public disclosure. Sources with knowledge of the sale disclosed the sale value.“Dermody Properties looks forward to continuing our long-term commitment to the project through our U.S. Core Logistics Partners II joint venture. We look forward to continuing our investment in New Castle County with our project on Jamison Corner Road as well as several other opportunities throughout Delaware,” the firm told Delaware Business Times about the sale when asked about it.AXA has been expanding its investments in the U.S. in recent years, and acquired a 23-asset, $1.2 billion portfolio from Dermody in December. It is under contract to acquire nine more assets totaling $850 million upon their completion in 2022 and 2023.The French firm has more than $186 billion in assets under management worldwide, including $3.4 billion in 20 U.S. markets.“The quality and scale of the Dermody Properties portfolio, together with its resilient income profile and attractive geographical diversification, made it stand out as a particularly compelling investment opportunity,” Steve McCarthy, head of North America at AXA IM Alts, said in a December statement. “Logistics remains one of AXA IM Alts’ long-term conviction calls as demand for prime space shows no sign of abating thanks to structural shifts driven by the rapid growth of e-commerce and evolving changes to worldwide supply chains. We are delighted to partner with Dermody Properties to maximize the value of the portfolio for the benefit of our clients in the years to come.”The sale prices for industrial space in Delaware have been steadily rising, capped by the record sale of MTN1. It’s not a local phenomenon though, as industrial asset prices are growing nationwide.“We did an analysis for our most recent fourth-quarter national reports, and we found that more warehouses traded for over $300 per square foot in 2020 than in the previous five years combined,” Lisa DeNight, national industrial research director at real estate brokerage Newmark, recently told DBT. “The story of Delaware's industrial market ascendancy, which certainly a high-profile sale like [MTN1] does illuminate, is not a unique story. It's taking place across the country.”While international investment giants like AXA and Macquarie might have only looked at primary market assets in major metro cities previously, they are now frequently looking to secondary markets where prime assets are growing as well, said DeNight, who previously tracked the greater Philadelphia area before taking the national role.“Certainly, in secondary markets, like Delaware, there's more yield and rents have more room to run. That rent growth then attracts more developments, and you get wonderful assets like what just sold,” she explained.