Validating its belief in the Philadelphia industrial market, Wharton Industrial, a platform company of New York City-based Wharton Equity Partners, and its joint venture partner, Walton Street Capital, have sold Twinbridge Industrial Park, a 37-asset, 1.3 million-square-foot. portfolio in Pennsauken, New Jersey.
At a total price of $194.5 million, the sale and is one of the largest industrial transactions in New Jersey this year. The buyer of the portfolio was an affiliate of DRA Advisors, headquartered in New York City.
Previously, the partnership completely repositioned a nearly 300,000-square-foot derelict former subway repair facility in South Philadelphia, which the partnership subsequently leased to Amazon. The property was ultimately sold, achieving an internal rate of return of over 200%. The Twinbridge transaction also achieved an IRR of approximately 80%.
The Twinbridge portfolio had similar characteristics to the prior property, which had been disregarded by the local investment community, as the purchase was made against conventional wisdom in July 2020. At that time, COVID-19 was becoming a significant factor and doubts abounded as to the impact the pandemic would have on the economy.
“With over 50 tenants at Twinbridge, there was legitimate concern as to the sustainability of the tenancy,” said Peter C. Lewis, founder and chairman of Wharton Industrial. “Despite others who were fearful of investing at that time, we saw the portfolio as prime real estate that we believed would weather economic uncertainties. Supporting our belief were the low vacancies in the market, tightness of supply, proximity to Philadelphia and the diversity of tenants (many of whom were long-term occupiers providing essential services). Our intuition was greatly rewarded, with rents increasing more than 100% during our three-year hold, through strategic property improvements and extensive leasing management.”
Furthering its contrarian thinking, Wharton and Walton Street elected to list the property for sale in the first quarter of this year, when high interest rates and fears of recession were leaving most potential sellers on the sidelines.
“Although there was risk in pursuing a sale in this climate, we believed that the quality of the properties, the growing interest in small bay industrial, and the fact that there would be limited competing properties on the market would outweigh any headwinds,” Lewis said. “We are obviously very pleased with the outcome. We would not only like to thank our long-term partner, Walton Street, but also the CBRE team of Brad Ruppel, Mike Hines and Liam Fahey, as well as Marc Isdaner and Ian Richman from Colliers, who collectively provided us with superior representation on the sale.”
