Woodmont principal discusses $27M budget to reposition industrial park
New Jersey-based Woodmont Industrial Partners, in a joint venture with AEW Capital Management LP, spent $27.8 million last June to acquire the Capital Business Center near Harrisburg International Airport in Lower Swatara Township.
Demolition is underway to remove two of the six structures in the industrial business park.
Those Class C buildings will be replaced with two Class A warehouse facilities — totaling nearly 534,000 square feet — as part of a projected $27 million capital budget to reposition the complex.
Eric Witmondt, principal of WIP and CEO of parent company Woodmont Properties, recently spoke with the Business Journal about buying and improving the renamed Capital Logistics Center and challenges the real estate company faces as it expands its industrial portfolio.
Q: Can you explain the relationship with AEW and the investment strategy?
A: We formed in early 2013 a joint venture with AEW, which was port-focused, industrial, large-box distribution warehouse buildings that we could either buy or develop between Port Newark and Port Elizabeth, N.J., and Harrisburg, Pennsylvania, and all of the inland ports in between — in Bethlehem and the Lehigh Valley and obviously Harrisburg with the airport and the intermodal system there.
Since the beginning of 2013, we've acquired about 2.7 million square feet with AEW, and we are in the process of embarking on our first major new development, which is a 400,000-square-foot speculative building which is going to replace an obsolete building at Capital Logistics Center. (That is) known as 200 Capital Lane.
Tell me about the demolition work, the construction timeline and other site improvements.
The demo should be complete at the end of June. They are doing site work and padding the site, so that it's almost as if we're doing some base construction work while the demolition is occurring. We're going to be able to deliver a building during the fourth quarter.
What makes this building somewhat unique is we're building this building on the eastern shore, where most of the industrial stock that exists is older stock with lower ceilings. We're building a 36-foot-clear (height) building, which is going to have LEED certification. The eastern shore has the airport, the intermodal and a very strong labor force, whereas the western shore, Carlisle, et cetera, has seen most of the new buildings built. This will be one of the few new buildings built on the eastern shore and will certainly be the building that has the highest ceiling and the greatest infrastructure and LEED certification.
(The second building at 300 Capital Lane) will be 133,000 square feet and will be built immediately after or maybe while we're in the middle of construction of the first building. We're continuing to operate about 800,000 or 900,000 square feet in the park that is remaining and we want to limit the disturbance to those existing tenants.
How long did this deal take to come together and what was the biggest reason you acted on this site? How much is the capital budget?
We were on a tour with the brokers who now represent the site that were representing the previous owners as a leasing representative. They were giving us a tour of the market to show us new opportunities to buy. This property was not on the market. The second that I saw it I saw that there was a niche in the market that was unmet with new existing product that didn't have the ceiling height and the column bay spacing and the loading distribution that was needed in this marketplace.
And I saw that the existing two older buildings, 200 and 300 Capital Lane, were really causing this park to be viewed as a secondary asset. If these buildings could come down and new buildings could be built, it was a totally different asset. We saw a great redevelopment opportunity that we jumped on as soon as we saw the park. Within 30 days, we had a deal where we had a letter of intent that went to contract to be able to close on the asset.
We're putting in an entirely new signage program, both monument signage as well as building signage. We're repainting every building in the park and we're doing a lot of landscaping and other site-related work. That entire capital budget is probably $27 million.
When those new buildings are completed, what type of tenants are you trying to attract?
There is a very strong market, especially on the eastern shore, for e-commerce companies. The e-commerce requires a larger workforce. It's more labor intensive than just a straight warehouse distribution market.
Being next to Penn State (Harrisburg) and being on the eastern shore, where there is a much deeper labor market, as well as being directly across the street from Harrisburg International Airport, where FedEx and UPS have shipping facilities, we believe this building is ideally suited for e-commerce or warehouse distribution companies that need to move their product quickly and not have long-term dead storage.
What are the prospects for other deals in Central Pennsylvania? How has the competition changed?
I think there are certainly more investors and developers that are willing to enter this market. It's not as strong as New Jersey and the Lehigh Valley. As you continue to go west, you start to lose some of the real core investors that want to be as close to New York City as possible. But the investor base is much greater today than it was a year ago.
We believe that there is a great opportunity in this marketplace and the Harrisburg market. We think there is enormous pent-up demand by larger industrial users. We believe that there is a lack of high-quality warehouse distribution space that is modern space with some of the bells and whistles that today's users demand. And we think there is a great opportunity both for new construction as well as renovation and rehabilitation of some older facilities that have good, sound structural elements that can be upgraded to meet today's user's needs.
We hope that we are going to be continuing to acquire a number of existing assets and additional parcels of land in this marketplace. We're very bullish on it and we're strong believers in the long term that this market is going to continue to grow. We continue to believe equally or even more so in the eastern shore, where we can find product, as opposed to the western shore, which has always been the more popular for new investors today.
More on Capital Logistics Center
Capital Logistics Center was purchased for $27.8 million last June, according to Dauphin County property records.
Deed records show the previous owners paid $64.7 million in 2003.
The industrial center has six buildings. Two are being demolished and rebuilt.
The building at 200 Capital Lane, which will be 400,060 square feet, will be the first construction project. Completion is slated for the fourth quarter, according to Woodmont Industrial Partners.
Blue Rock Construction Inc., with offices in Allentown and New Jersey, is the general contractor.
The other building, at 300 Capital Lane, will be 133,650 square feet.
Once construction is completed, the six-building business park will have about 1.43 million square feet of industrial space.
Other recent redevelopment deals for Woodmont Industrial Partners include a 185,000-square-foot warehouse distribution facility in Silver Spring Township, a 385,000-square-foot building off Interstate 78 near Kutztown, Berks County, and a 729,000-square-foot building off I-78 in Clinton, N.J.