Not-so-strange bedfellows He doesn't give Wall Street a second thought, much less a first thought, when it comes to an IPO for Atlanta-based Industrial Developments International (see Industrial Markets review, page 74), but when it comes to partnering with Wall Street's big guns, IDI president and CEO Greg Gregory is quite receptive, if a bit picky. Early last month, IDI and New York-based J.P. Morgan Investment Management Inc. formed a new company, Industrial Properties America LLC (IPA), that will initially operate, manage and lease 6 million sq. ft. in a 26-building, $260 million portfolio spread across six states. Although I wouldn't quite call this the feel-good era of commercial real estate, IPA does represent a trend of win-win partnerships on the development-, investor- and finance-side that are sweeping the industry (see our October 1 cover story).
The 50-50 partnership creates investment opportunities for IDI, which is normally a merchant builder, while allowing J.P. Morgan to tap into IDI's development expertise. IDI will develop for IPA on a fee basis - the partnership has 2 million sq. ft., valued at approximately $100 million, scheduled for development in the next three years. IPA's current portfolio includes distribution facilities in Atlanta; Chicago; Los Angeles; El Paso, Texas; Ft. Lauderdale, Fla.; Ontario, Calif.; and Salt Lake City. All of the buildings in the existing portfolio were built within the past three years. IPA also may sell some of its current portfolio and invest in other developers' projects.
Although IDI has had several similar opportunities, the timing of the partnership with J.P. Morgan was right because IDI has built up sufficient mass that such a venture would not dilute the company's earnings, Gregory says. J.P. Morgan's national and international reputation and fit with IDI were also critical factors, he says.
"At the end of the day, the money is important, but the ability of each partner to fill his role and the merging of the people were most important in our decision," says Gregory. "This is not one of those relationships where you have a couple of companies sitting around clipping coupons."