How We Lease
Delivering Value to Our Tenants & Investors
When we completed the acquisition of the Hickory Hill industrial outside storage in Memphis in January 2021, we not only obtained a valuable property but also inherited a prominent tenant - TJX, the esteemed parent company of renowned retail chains including TJ Maxx, Marshalls, HomeGoods, Sierra, and Homesense.
As the leading off-price retailer, TJX was diligently fulfilling the needs of its online customer base. The Hickory Hill site bustled with activity as it housed an abundance of containers, trailers, and trucks facilitating the seamless flow of goods to and from the adjacent distribution center. Remarkably, this industrial outside storage facility stands as the sole establishment of its kind within a one-mile radius.
We Uncover Customer Value
In January 2021, we faced a critical decision regarding TJX's lease, which was nearing its expiration within a year. We found ourselves at a crossroads: should we wait until 2022 to negotiate a new market rate with either TJX or a potential new client, or should we proactively engage in discussions with TJX to explore possibilities beforehand?
From a logical standpoint, waiting for the following year seemed advantageous, considering the upward trend in market rates, which had been consistently increasing by 20-30% year over year. Additionally, Memphis boasted a remarkably low market availability rate of below 3%, while the rapid adoption of E-commerce continued to drive demand even higher.
As a prominent national service provider and a seasoned participant in the market for the long haul, our focus extended beyond the profitability of individual properties. Our objective was to optimize value for both the tenant and our investors.
With this in mind, we proactively engaged in a discussion with TJX's Asset Manager. Through our conversation, we gained valuable insights into their priorities, which underscored the significance of maintaining uninterrupted operations, particularly during a period when the supply chain confronted numerous challenges.
When presenting potential solutions, our approach placed a clear emphasis on ensuring the continuity and stability of their operations, rather than solely pursuing short-term cost savings.
Achieving Optimal Value
for Tenant and Investor
With a deep understanding of TJX's priorities, we presented a compelling proposition to initiate a new lease agreement promptly, featuring a 20% increase in rental rates compared to the existing lease.
The proposed lease would span a duration of five years, complemented by two tenant options for further extension. Notably, this solution not only aligned with TJX's objectives but also served the best interests of our esteemed investors.
Our proposal was crafted to address TJX's concerns by securing the site for a generous period of up to 15 years, effectively establishing a fixed future lease rate. By accelerating the lease increase timeline by nearly a year and securing a long-term tenancy agreement, we not only exceeded the expected return profile but also laid the foundation for future value-creation opportunities.
This successful transaction positioned us to embark on additional projects with TJX, fueling the potential for further value generation for our investors. TJX readily accepted our proposal, The site, less than a year after acquisition, has already delivered an impressive cash-on-cash return of approximately 22% to our investors by the end of 2021.
Additionally, TJX achieved record-breaking sales and net income, marking a milestone in their 45-year history.
This collaborative endeavor exemplifies our commitment to forging mutually beneficial partnerships and optimizing outcomes for all stakeholders involved.