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Capital
Commercial Investments
(CCI) purchased the Walker Bolt facilities in July 2001 for $959,000
or $16.68 PSF. The Walker Bolt facility is located at 10202
Airline Drive, and is comprised of seven legal lots totaling 2.9 acres.
The improvements include approximately 57,489 SF of office and warehouse
space as well as two 5-ton bridge cranes. Walker Bolt is a regionally
based company specializing in fasteners that are used by NASA, power
plants, and the oil and gas industry.
WALKER
BOLT - 57,489 SF
Operations
Walker Bolt produces specialty bolting that is used in the oil and gas
industry as well as in power generation plants, pulp mills, mining operations,
and fertilizer plants. Walker Bolt, owned by Industrial Holdings,
Inc., is part of their Stud, Bolt, and Gasket Group which manufactures
and distributes stud bolts, nuts, gaskets, hoses, fittings and other
products from 11 locations in Texas and Louisiana. Walker Bolt
primarily targets its products to the petrochemical, chemical, and oil
and gas industries located in the Gulf Coast region of the U.S.
Industrial Holdings’ other business interests include energy, engineered
products, and heavy fabrication. Walker Bolt has operated from the current
facility since 1963. Over the years, the property has expanded
to meet the needs of Walker Bolt and their customers.
Credit
Industrial Holdings was recently purchased by T-3 Energy, a privately
held oil-field services company and First Reserve, who acts as financial
and strategic partner. T-3 Energy, formed in February, 2000, is
a Houston based holding company which targets Gulf of Mexico-focused
specialty manufacturing and service companies. First Reserve was
founded in 1980, and invests exclusively within the energy and energy-related
sectors of the economy. Their current portfolio of energy holdings
has a market value in excess of $1.7 billion.
Lease
The current lease terms for Walker Bolt were negotiated early this year.
Starting April, 2001, the company pays monthly an annual amount of $122,000
for the first year. The remaining years are as follows: 2nd year
$135,000, 3rd year $145,000, and $150,000, $155,000, $160,000 and $165,000
during the final four years. CCI has modeled a renewal of the
tenant at a market rate of $160,000. We strongly believe the tenant
will renew given the extensive permanent and semi-permanent mounted
equipment used in their business process. Given current leasing
comparables, the rate reflects a current market rate of $0.18 psf along
with 3% inflation over 7 years.
This opportunity represented an excellent
investment for the following reasons:
- Investors participate in a 75% ownership
position of high income producing properties with a 15% plus cash-on-cash
yield paid monthly.
- Overall risk is reduced with the
inclusion of two tenants with heavy credit backing engaged in different
business models with associated income streams.
- Future contractual rent increases
for both properties’ guarantee additional dollars to combat with inflation
and cover possible rollover costs.
- Extremely high cost to move because
of extensive investment in plant equipment and connectivity as well
as their historically proven long tenancy history.
- Purchase leased properties at $22
psf which is well below current replacement cost of almost $40 psf.
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Market
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