Case Studies

Problem: In 2015 Phoenix acquired the former Maytag manufacturing complex of 2,050,000 SF located in Newton, Iowa. The seller had acquired the complex from Whirlpool Corporation and began to lease the space to industrial tenants but completed few renovations to the complex. Given the historical manufacturing, complexities included over 100 deep pits (used to hold manufacturing equipment), interior buildings, structures, and mezzanines across the complex. Until the pits were filled and capped with concrete, the interior buildings, structures, and mezzanines removed, the impacted bays couldn’t be fully renovated and leased. Simply put, the challenge was how to efficiently unscramble the elements of the historical manufacturing.

Opportunity: By efficiently removing these elements, over 700,000 SF of high quality industrial space would become available for our standard white box treatment and the eventual leasing to quality industrial tenants.

Solution: First, since “As Built” plans didn’t exist, Phoenix engineers conducted a study to verify the location, height, and size of each column, structure and the infrastructure. This processes took a team of two approximately ten days. Second, Phoenix’s construction team designed a plan to demolish the masonry structures which were crushed on site to fill the pits, reducing costs in an environmentally sound manner. Third, non-essential pipes and electrical service were removed and salvaged to increase clear height. Fourth, the pits were filled with crushed masonry, stone, rebar, mesh, and finally capped with 8″ of concrete to create a smooth continuous surface. Once completed, we proceeded to clean the remainder of the ceilings, paint the interior portions, upgrade the fire suppression, install new heating and high efficiency lighting.

While the work isn’t complete, we have already renovated over 350,000 SF and leased it to new tenants.

Problem: A Fund Manager representing four, single purpose limited liability companies that were tenant-in-common partners asked Phoenix Investors to solve its problem with a Class A industrial property in West Bend, Wisconsin. The single tenant, 160,000 SF, ten-year-old distribution warehouse became vacant after the sole tenant filed a state equivalent bankruptcy action and the lease was rejected. The operating agreements for the tenant-in-common partners had no mechanism for capital calls, the members of the limited liability companies were subject to substantial tax recapture on the income if the property was lost to the lender or sold, and the partnerships were not set up for active management of the property.

Opportunity: To secure an equity arrangement with the existing partners that did not trigger a taxable event, and provided the current partners with a potential upside in the property.

Solution: Phoenix reviewed the problem from several angles to maximize a solution for the members of the underlying LLCs that had little tax basis and no appetite for voluntary reinvestment in the asset. Creatively, Phoenix devised a structure in which a Phoenix affiliate would make an investment into each individual existing tenant-in-common LLCs in exchange for additional membership units in return for Phoenix’s affiliate funding all capital improvements and carrying costs until a replacement tenant was found and positive income resumed. Phoenix’s management team secured consent of the Life Lender servicer for a change in ownership due to the dilution of the existing members and a change in management. Phoenix’s construction department coordinated all rehabilitation of the property. Approximately one year later, Phoenix’s leasing department secured a new tenant — a successful and global pet supply manufacturer from China. This company built out a state of the art manufacturing plant; today it ships its products to retailers including Walmart and Target. The property is now stabilized, with the tenant making heavy on-going financial investments into the facility.

Problem: In 2015 Phoenix acquired the 289,000 square foot former Sigma Aldrich Chemical Corporation manufacturing complex located in an older industrial corridor of Milwaukee. Adjacent to the Sigma Complex was the Citation Foundry which had remained abandoned and partially demolished for over 10 years. Given the cost of demolition and the unknown environmental hazards, the City of Milwaukee refused to take and raze the Citation Foundry. Contributing to the challenge, the blighted property was causing a nuisance to the community, hindering renovation efforts, and harming neighborhood safety.

Opportunity: As a stakeholder, for Phoenix to partner with public officials in Milwaukee to create a safer environment for the neighborhood and community, while at the same time carrying out the plan in a cost-efficient manner for tax payers.

Solution: First, Phoenix filed suit against the current property owner relying upon a state of Wisconsin Nuisance Statute. As a settlement of that litigation, a Phoenix affiliate acquired nominal title to the Citation Foundry. With legal control of the property, Phoenix had contractors scrub the site of overgrown vegetation and squatters, while Phoenix consultants conducted environmental testing of the Citation Foundry.

Second, Phoenix and the Milwaukee City Attorney collaborated to find a legal solution. Using a recently enacted but rarely used Wisconsin State Law, Phoenix worked with the City to foreclose on the property to clear up all outstanding existing liens and to transfer title to a Phoenix affiliate. The demolition of all buildings was undertaken and completed in 2016 by Phoenix. Working with the Wisconsin DNR, Phoenix is completing environmental testing and remediation so that the Citation property can be put back into useful industrial service.

While this work continued, the adjacent Sigma Complex underwent a complete renovation by Phoenix, and the property was leased to a national manufacturing tenant for its distribution.

This private-public partnership of Phoenix and the City of Milwaukee was a launching pad for the “Promise Zone” initiative to reduce blight in Milwaukee.

Problem: In 2012, a regional bank held a mortgage secured by two adjacent industrial properties (totaling approximately 575,000 square feet) where the current value of the properties was below the mortgage loan amount due to mismanagement by the landlord (borrower) and a lack of funds to complete repairs and capital improvements. The relationship between the landlord and bank had become adversarial over the years with neither party acting in the best interest of the underlying real estate. Consequently, the tenant base began to erode rapidly and property taxes had become a significant priority lien on title.

Opportunity: To purchase well constructed sub-performing industrial assets that required extensive sorting and analyzing of the complexities of the transaction, including prior bankruptcy and foreclosure filings and extensive subsequent rehabilitation, to unearth a value proposition meeting Phoenix’s risk/reward metrics.

Solution: Phoenix initially submitted a solution whereby it would nominally acquire the deeds to the real estate, subject to the bank’s liens and outstanding property taxes – all with the consent of the lender. Removing the borrower from the transaction reduced animosity and allowed Phoenix to reach a fair price with the bank to release its liens. Phoenix subsequently met with the bank and negotiated a fair settlement of its liens based on the current condition of the properties and the costs to pay outstanding property taxes. Phoenix immediately commenced rehabilitation of the properties, with initial focus on the building envelope followed by interior efficiency upgrades and cosmetic exterior improvements. In short order, property financials improved, reflecting a stabilized income stream, much lower operating costs and lowered rehab costs – all significantly less than previous bank projections. Lastly, Phoenix configured the properties for highest and best-use tenants and income streams, which included office build-outs for non-profit tenants (given its advantageous location) and re-purposing a portion of one property for self-storage.

Problem: In 2012, an environmental firm acquired a former Amerock/Rubbermaid industrial facility with approximately one million square feet that lacked a comprehensive plan for managing the cost and expenses associated with repositioning the property.

Opportunity: To acquire a large asset at an attractive price, while taking advantage of Phoenix’s competitive advantages in rehabilitation for projects of this size and type at costs below industry norms.

Solution: The Seller and Phoenix created a joint venture structure, whereby the Seller contributed the real estate and received a preferential return based upon a specified waterfall. Phoenix funded the initial rehabilitation costs and was responsible for managing the property and rehabilitation process. Thereafter, each party was responsible for its share of expenses.