Capital Square 1031 Acquires Newly Constructed, 2.69 Million-Square-Foot, State-of-the-Art Amazon Distribution Facility
The acquisition is on behalf of a Delaware statutory trust investment offering that seeks to raise $52.2 million in equity from accredited investors
Capital Square 1031, a leading sponsor of Delaware statutory trust (DST) offerings for Section 1031 exchange and other accredited investors, announced the acquisition of a 2,690,000-square-foot distribution facility on a long-term absolute net lease to Amazon.com Inc. The facility was acquired on behalf of CS1031 Zero Coupon Fulfillment Center, DST.
“This significant offering is designed for Section 1031 exchange investors who need additional debt because their replacement property has lower leverage than their relinquished property,” said Louis Rogers, founder and chief executive officer. “Section 1031 requires equal or greater debt to qualify for 100% tax deferral, but leverage today is much lower than in the past, making high LTV offerings very desirable. In addition to exchangers, other owners of real estate want to invest in real estate like this that generates excess passive losses from a combination of depreciation, cost segregation and bonus depreciation to offset taxable income from other real estate investments. Due to the quality of the Amazon facility and financial strength of the tenant, this offering has both a compelling tax angle and exceptional economics for Capital Square’s investors nationwide.”
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Located at 500 32nd St. S.W., the 169.6-acre property is adjacent to U.S. Route 65 and Interstate 80 in Bondurant, Iowa, a premiere industrial submarket in Greater Des Moines. The four-story structure was completed in the fourth quarter of 2020. The building was designed by Amazon with the most recent technological advances and high-grade materials and can process nearly one million packages per day by implementing both robotics and human labor to maximize efficiencies.1,2 The property is leased on an absolute net basis and is guaranteed by Amazon, which enjoys an investment-grade credit rating of AA from by S&P.3
“Structured to be highly tax efficient, this acquisition includes a dual loan system that shields investors from phantom income,” said Whitson Huffman, chief strategy and investment officer. “The lease also enjoys unsurpassed creditworthiness from the full guaranty of Amazon and its investment-grade corporate credit.”
As of February 2022, Amazon ranked as the world’s fifth largest company by market capitalization, and the fourth largest in the United States at nearly $1.52 trillion.4 It is the second largest firm in the Fortune 500. Amazon operates its retail sales and distribution activity through its Amazon Services business line, the sole tenant of the Bondurant, Iowa facility. As of December 2021, Amazon’s domestic industrial network totaled more than 347.6 million square feet of active facilities, with more than 125.6 million square feet either planned or under development.5 Amazon Robotics sort fulfillment centers are the largest facilities in the Amazon logistical network.
CS1031 Zero Coupon Fulfillment Center, DST seeks to raise $52.2 million in equity from accredited investors.
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Greater Des Moines has experienced a great deal of interest from developers and end users, with more than 630 acres purchased since 2019.6 The MSA is also attractive to technology companies. Des Moines enjoys a high ranking on the 2021 lists “Top Emerging North American Tech Market” by CBRE, “Most Resilient Tech Hub” by LinkedIn, and “Rising Star for Tech Jobs” by CompTIA. As a result, tech companies, such as Apple, Facebook and Microsoft have found the area to be a strategic and cost-effective location for data center operations.
Capital Square acquired the property from Mesirow Realty Sale-Leaseback Inc. (“Mesirow”). Mesirow’s Sale-Leaseback Capital team structured and financed the development of this property, starting prior to the commencement of construction. Mesirow’s breadth of specialized expertise, depth of relationships and balance sheet strength has enabled the firm to execute more than $8 billion in single-tenant transactions while serving the long-term strategic needs of organizations such as Amazon.
Since its founding in 2012, Capital Square has acquired 149 real estate assets for over 4,600 individual investors, spanning across 5,800 investments, seeking quality replacement properties that qualify for tax deferral under Section 1031 of the Internal Revenue Code and other investors seeking stable cash flow and capital appreciation.
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