PPM America lends $236M on SparrowHawk-Almanac industrial buy

Commercial Observer reports that SparrowHawk and Almanac Realty Investors, operating as a joint venture, secured $236 million in acquisition debt to buy The Central Logistics Portfolio, a 20-building industrial collection in the Midwest. PPM America provided the loan, structured as a five-year fixed-and-floating rate facility. JLL Capital Markets arranged the transaction, with Brian Walsh, Lucas Borges, Steve Klein, Chris Pratt, Emma Berner and Christian Johnston on the assignment. Fidelity Investments earlier reported EQT as the seller and put the purchase price just under $400 million.

The portfolio runs 4.4 million square feet in six markets — Cincinnati, Columbus, Dayton, Louisville, Cleveland and St. Louis — across Kentucky, Ohio, Missouri and Illinois. Buildings average 221,000 square feet and were built, on average, in 2006. Occupancy stands at 94 percent, spread across 30 logistics and distribution tenants. The properties sit close enough to reach about half the U.S. population by truck within a day, the standard argument for assembling a scattered Midwest warehouse book.

Against the reported price, the $236 million loan lands at roughly 59 percent loan-to-value. The equity slice, on the order of $160 million, is the cushion in front of the lender. The collateral would need to lose more than two-fifths of its value before PPM's principal is impaired. That is a cash-flow underwrite, not a value-add speculation.

The financing arrives less than a year after Almanac committed $300 million to SparrowHawk for acquisitions. JLL's Walsh said lender interest was strong, pointing to the institutional quality of the ownership and the portfolio's Midwest positioning.

The five-year term is the detail worth weighing. Buildings completed on average in 2006 will be approaching three decades old by the time the loan matures. The strategy depends on lease renewals in that window, or a sale before the assets start to feel dated. The fixed-and-floating structure keeps the starting coupon lower than an all-fixed loan would carry while giving the lender some protection on rate direction.

Six vacancy points are the soft spot. With 30 tenants spread through the portfolio, no single lease is existential, but the owner will be managing that many separate renewal conversations. A 2006 average is not extreme for bulk warehouse space, and the portfolio's geography makes it tradeable. The bigger risk is replacement rents at the end of the term, not the buildings themselves.

Alfredo Gutierrez, SparrowHawk's president and founder, framed the transaction as a platform expansion, crediting the asset locations, JLL's financing work, and PPM's execution. The term sheet says the same thing in cleaner arithmetic: five years, fixed-and-floating, roughly 59 percent loan-to-value against a 94 percent occupied portfolio. When the loan matures, renewal rents will tell.