Federal Express Ground Distribution Facility – Burlington, Washington

This property is a 68,269 square foot distribution center located in Bay Ridge Industrial Park, adjacent to the Skagit Regional Airport along the I-5 in Burlington, Washington. The property is leased to FedEx Ground Package Systems, Inc. under a ten-year lease with two additional five-year options. The property was purchased on a cap rate of 8%.

We secured a 70% mortgage with an interest rate of 5.6% amortized over 30 years. After deducting management fees, principal and interest payments and replacement reserves the cash-on-cash return is 6.96%. The effective rate of return is 12.89%.

Subsequent to our purchase of this facility, FedEx paid for a 12,852 square foot expansion of the building. The landlord does not collect rent from the additional square footage during FedEx’s occupancy. However, Fedex will more than likely exercise its option to stay in the property beyond the original ten-year term, and the landlord will benefit from the rent escalations in the option periods.

Furthermore, when the property is eventually leased to another tenant the landlord will be able to collect rent on the additional square footage, which will increase their return substantially. So either way, it’s a win-win for the landlord.

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