I’d like to highlight that Mike Brennan’s effort on this deal whose expertise in industrial and single-tenant assets was invaluable. Mr. Brennan serves as both Center Executive Director and Chairman and Managing Principal of Brennan Investment Group. He and Mark Eppli co-lead the PE Track, and serve as faculty for the program.
It’s time to CHEERS! In class tonight we received an email that $198,000 had officially been wired to SARA Investments. A deal of many firsts: first investment from the 2021-22 cohort, first Industrial deal, and the first deal in Wisconsin for graduate students who are enrolled in the Private Equity Track at the Wisconsin School of Business.
My team members, Jake Greenberg (MS ’22), Will Puchner (MS ’22), and I received an offering memorandum for 4260 Capital Circle located in Janesville, Wisconsin a week prior. At first glance, we were skeptical as this was a single-tenant property in a tertiary market, but we decided to dig deeper.
And I’m glad we did. The value-add component for this deal came from the 23,488 sq ft proposed freezer expansion with 3% annual rent escalations for the remaining lease term. Additionally, we had a sticky tenant in the food processing and manufacturing business with heavy investments in building interiors. All this wrapped up in a long-term lease that expired in 2036.
The sponsors reside in Madison and so, the class was fortunate to have Christina Ballweg, Executive Vice President, and Mike Crivello, Acquisitions and Dispositions Analyst for SARA, share more about the company and this investment opportunity. Based on their “roundtrip” investment track record, specifically in industrial properties, we were confident that they had the experience and skills to execute this deal.
When I was tasked with finding rent and sale comps, I struggled because I knew finding industrial properties in Janesville with similar building characteristics would not be easy. I dialed Mark Eppli, Graaskamp Center Director, and asked “How do I find credible industrial comps!?”. The response I received altered the way I approached the deal thereafter. He simply said, “this is not an industrial building; this is a single-tenant building and that’s how you should find comps.”
Dr. Eppli was also kind enough to drive us to Janesville. The industrial park felt clean and manicured. The exteriors of the building seemed to be in good condition and the parking lot didn’t show a lot of wear. We then took a detour to Culvers (it was my first time, and after all, we were here to learn) and discussed site details over some juicy burgers and root beers.
Due to the short investor commitment deadline, my team and I went on to present this investment opportunity to Management Committee (a small group of investment committee members, the class, Mike Brennan, and Mark Eppli) and then on to the full Investment Committee within a couple of days. They had very insightful and challenging comments and questions. At the time, this process was stressful. However, in hindsight, this experience was possibly the best learning experience I could’ve asked for.
I’ll be signing off as it’s only appropriate to head to the KK tonight and cheers over a couple of Spotted Cows! Until the next deal…