Product Drive

Rochester Hills, MI

Industrial

Active

Kumo Capital has increased its presence in the Detroit Industrial Market through the acquisition of 2700 Product Drive. Product Drive is an arbitrage play with a short-term sale leaseback. The business plan is to cash flow the asset from day one of operations while building an operating reserve and working to backfill the property long-term.

Property Highlights

2700 Product Drive is 94,443SF on a 5.5 Acre Parcel in Rochester Hills, MI.

Building Specifications

The building is an ideal North American Headquarters for a national company
Clear heights at the property are 21′
There are 5 Loading Docks in various areas
The roof was replaced less than two years ago and has a 25-year full warranty
It boasts an ESFR sprinkler system which is highly sought after by potential tenants

Tenant Composition

The current tenant is Webasto Roof Systems, and they will remain in-place for the next 11 Months paying $16.00/SF NNN
Kumo is partnering with Detroit’s top leasing broker to backfill the space while Webasto is still paying rent (seeking a 7-10 year lease for the full property)
We anticipate minimal downtime and a release at approximately $8.75/SF NNN (>9% CAP on Stabilization)

Exceptional Location

The property is located in Rochester Hills, MI, one of the top industrial submarkets in the state (median HH income of $116K, population >177k)
2700 Product is minutes from Hwy-59, running from Detroit to Western Michigan
Multiple national companies are headquartered in Rochester Hills including BorgWarner, FANUC America, Plastic Omnium, GST AutoLeather, and Letica Corporation

Overview

The inherent risk associated with a short-term lease has allowed us to acquire this property for a significantly below market basis of $96/SF (Approx 25% below market of $130/SF) and a high year one cap rate of 14.7%. We are confident in our ability to backfill the building and stabilize it at a cap rate of above 9% by year three. Our certainty in releasing 2700 Product stems from the follow:

Vacancy rates in this submarket for industrial product are less than 3%
Multiple comparable buildings in close proximity have leased for $9.50/SF NNN or above (Aiming for $8.75/SF NNN here)
Partnership with Detroit’s top leasing broker (>6.5M SF of industrial leasing in the past 3 years)
The subject property has been maintained exceptionally by the current tenant and features an ESFR suppression system and 25-Year Roof warranty