Realterm's Massachusetts IOS buy trades on buildings, not acreage

Realterm's two-property IOS purchase in Boston's Western I-495 submarket covers 10.25 acres across Ayer and Devens and 20,200 square feet of maintenance buildings between them, a footprint the firm is buying as much for the buildings as for the acreage. The Ayer site at 15 Westford Rd. contributes 3.5 acres and an 8,200-square-foot facility with four drive-through bays and an onsite fueling station; 27 Cook St. in Devens adds 6.75 acres and a 12,000-square-foot building with a single bay. Terms were not disclosed, and Connect CRE, which first reported the transaction, names no seller.

Measured against what the sector has been printing, two yards in the I-495 corridor is a small trade. In August, Realterm and Starwood closed a $672 million financing on a 78-property IOS portfolio, which this publication called the sector's first broad debt benchmark; the same week, Jadian Capital paid $167 million for a Staten Island IOS site, a second public benchmark inside a week. Institutional capital's share of IOS investment reached 45 percent in September, up from 30 percent four years earlier, with construction staging supplying much of the pull—a use that stops when the buildout does. The clearing price for industrial now comes from the operator, the land basis and the data-center draw as much as from the building itself.

Nick Dupuis, Realterm's vice president of investments for the Northeast region, points to the same buildings; the properties sit in, in his words, "one of the region's strongest distribution submarkets," their improvements support "the efficient operations today's tenants seek," and "the limited supply of functional IOS maintenance facilities in this market" is what makes them worth buying. Scarcity, on that account, is five drive-through bays and a fuel island on a footprint that works out to roughly 2,000 square feet of improvement per acre.

Underwriting IOS that way is sound in a distribution corridor, and sturdier than banking land against construction staging, demand that retires itself when the buildout does. The buyer is the same $10.9 billion manager that financed a 78-property portfolio a month ago; two improved yards in the I-495 corridor read as the same trade at a smaller scale, bought one submarket at a time. Whether purchases at that size can move anything is a fair question, since two yards add no mark to a sector whose benchmarks have been seven- and nine-figure events. With no price reported, the pair adds nothing to what August produced; the first mark either yard could carry would come as collateral in a future Realterm financing, which is how the sector's broadest benchmark arrived in the first place.