Product Drive

Rochester Hills, MI

  • 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

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