Dear Investors and Partners,
Retail occupancy in the Merrillville portfolio is up to 98%, we are working with larger users for the flex building, tenants are moving into the office building, and we paid preferred returns to investors. Outside Merrillville, we passed on three deals after due diligence and added two new ones, one under contract and another under LOI.
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Deals under Contract or LOI
We continue to be selective in our acquisitions. Since June, we passed on three deals after due diligence uncovered issues that we worked to address but that ultimately left us with more risk than we were comfortable taking. We also added two new deals, one under contract and one under LOI.
Spartanburg, South Carolina. We decided not to close on the vacant industrial property, which was advertised as 12,500 SF. Parking was limited, actual rentable space was closer to 11,100 SF because the advertised total included covered outdoor space, the building had no rear access, and the low ceilings limited its appeal to a single tenant.
Miamisburg, Ohio. After meeting with the tenants at the 73,740 SF office/flex property, we uncovered issues and had to revise our underwriting. We couldn’t agree with ownership on a new price. As far as we know, the building is still on the market. We still like it and hope we can find a way to buy it down the road.
Itasca, Illinois. We decided not to pursue this partnership involving the 12,480 SF retail center. The current owner planned to stay in the building rent-free, and we had concerns about visibility and access.
Naperville, Illinois. We partnered with Saul Zenkevicius on a fully occupied 15,424 SF neighborhood retail center he has under contract. We are working through the final underwriting, financing, capital plan, and remaining property diligence.
Louisville, Kentucky. Ivan is returning from his trip there after visiting the 94,229 SF value-add shopping center we have under LOI. The property is advertised as 72% occupied, with 26,050 SF vacant.
Retail Building (7970 Broadway, Merrillville, IN), 29,771 RSF
One of the business owners already in the center signed a five-year lease for the building’s last vacant unit, a 1,630 SF suite, and renewed his existing lease for another five years. He will move his current business into the newly leased location and open a separate business where he operates today.
Another existing tenant will move from its current 671 SF suite into a larger space created by combining two neighboring units. The tenants that previously occupied those units were paying significantly below-market rents and have moved out. We are now building out the larger space for the tenant’s September 1 move-in.
The building is now 98% leased.
The 671 SF unit.
Flex Building (375 W 84th Dr, Merrillville, IN), 31,564 RSF
After working through the plans and build-out budget, we submitted a proposal for a 10-year lease covering all 9,417 RSF along the front of the building.
Remaining vacant blocks: 9,417 RSF along the front and 7,394 SF at the rear.
We are also in negotiations for the 7,394 SF rear block. We submitted preliminary plans and are waiting for feedback.
If we secure the front tenant and lease the rear, the flex building will be 100% leased to four large, high-credit organizations, which we expect will help compress the cap rate.
Office Building (8903-8939 Broadway, Merrillville, IN), 18,358 RSF
The leasing activity discussed in our June update has now translated into move-ins. Tenants have moved into 2,113 SF and 1,300 SF spaces. Work on another 1,550 SF space is complete, the space has been delivered, and the tenant is moving in.
The prospective tenant for the larger 4,659 SF vacancy did not move forward, so we have started dividing the space into two smaller suites. We also replaced the roof and continue to address cosmetic issues throughout the property.
Partial view of the building’s new roof, minor cosmetic improvements, and a new tenant in this 2,113 SF space.
After lengthy negotiations with a tenant that wanted to expand, we were unable to agree on terms. The tenant decided not to extend its lease and will move out of its 2,671 SF space at the end of August. With all new leases and that upcoming move-out, the building is 55% leased.
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Ivan & Alex
Principals
Columbia Creek Development, LLC