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Atlanta Investor Ditches Industrial Portfolio To Refocus On Its First Love, Retail

Newburger-Andes Senior Vice President Steve Farrar and Chief Investment Officer David Andes

Newburger-Andes has unloaded a large Metro Atlanta industrial portfolio and plans to use the proceeds to pivot back to its bread and butter: buying single-tenant retail.

The 45-year-old commercial real estate firm sold 35 shallow-bay warehouses, including 400K SF along Commerce Drive and Commerce Circle in the Fulton Industrial submarket, to Los Angeles-based Circle Industrial for $100M, Newburger-Andes Chief Investment Officer David Andes told Bisnow.

In a market where warehouses can span a football field width and reach 100 feet tall, Newburger-Andes' portfolio had far less sex appeal. But the facilities are located close to the heart of Atlanta and are leased to some 300 tenants averaging about 5K SF each. Smaller industrial spaces are becoming more sought out as last-mile distribution points become critical for retailers, and few can afford to build warehouses this small in such a high-cost environment, Newburger-Andes Senior Vice President Steve Farrar said.

“You can't replicate those types of buildings with the smaller spaces,” Farrar said. “You would need such a high price per square foot to justify construction, and the Atlanta rents aren't there yet.”

Farrar said Circle Industrial is betting that the demand for online shopping will only increase the need for last-mile facilities in major metros like Atlanta, allowing owners to incrementally push rents up over time. Farrar said the portfolio, at 98% leased, commands an average of $5.50 per SF in rent, more than a dollar more than the average warehouse rent in Metro Atlanta, according to JLL.

The firm assembled the portfolio over the course of four decades, targeting shallow-bay buildings in areas like Lithonia, along Interstate 85 through Gwinnett County, and in and around Hartsfield-Jackson Atlanta International Airport.

Newburger-Andes mainly invests in triple-net retail assets, tending to be single-tenant shops with strong-credit chain retailers on the hook for long-term leases. It is a strategy the firm plans to refocus on after this sale, Farrar said.

The firm owns nearly 200 retail assets leased to LongHorn Steakhouse, KFC, Dunkin', Arby's, Taco Bell, Family Dollar, Dollar General, Advance Auto Parts, FedEx and Sherwin-Williams.

"This sale represents an out with the old, in with the new investment focus," Andes wrote in an email, adding that the high net worth investors in the industrial portfolio saw returns more than five times their original investment.