Federal Express Ground Distribution Facility – Winona, Minnesota

This property is a 10,697 square foot cross dock truck terminal located in an industrial park along the I-90 corridor (and the Mississippi River) southeast of Minneapolis-St Paul and east of Rochester. The property is leased to FedEx Freight Corporation under a fifteen-year lease with two additional five-year options. There is a 10% annual rent increase beginning in the eleventh year of the original 15-year term. The property was purchased on a cap rate of 8.28%.

We secured a 70% mortgage at an interest rate of 6.2% amortized over 30 years. After deducting for management fees, principal and interest payments and replacement reserves, the cash-on-cash return is 7.58%. The effective rate of return is 11.82%.

In year eleven of this lease, the landlord will receive a guaranteed significant increase on their return, even before the options are exercised.

See Also: Real Estate Investments

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