AIP Realty Trust and its strategic partners are looking to fill what they feel is a huge gap with a portfolio of light industrial flex facilities focused on small businesses and the trades and services sectors in the United States.
Entrepreneurs and real estate veterans James Rea, Bruce Hall, Leslie Wulf and Ted Rea launched AllTrades Industrial Properties, Inc. in their base in suburban Dallas in April 2018. Their intent was to provide leased product to businesses that needed an upscale office, a functional and clean warehouse, small workspace studios and ample secured parking for trucks, trailers and equipment.
AIP (AIP-U-X) was publicly listed on the TSX Venture Exchange on April 14 through a reverse takeover with a Canadian-listed capital pool company (CPC) in conjunction with a qualifying transaction purchase of AllTrades’ 22,400-square-foot, nine-unit facility with 41 parking spaces in Lewisville, Texas that was completed in June 2020 and fully leased in six weeks.
“It was all fitted out to really provide for all the amenities that are required to operate effectively in this environment, with technology, security and interior finishes that were all top grade,” AllTrades executive chairman Greg Vorwaller — who came on board in 2020 after previously holding senior leadership roles with Trez Capital, Cushman & Wakefield and CBRE Capital Markets — told RENX.
Vorwaller, who has dual U.S.-Canadian citizenship, also became AIP’s president, chief executive officer and a trustee upon its launch.
Need for light industrial flex space
AIP and AllTrades believe there’s a need for these new developments as existing light industrial flex space: is aging; has a lack of capital expenditures; is in inconvenient neighbourhoods; has limited parking; lacks amenities; has unappealing facades and finishes; and has low ceiling heights and small warehouse doors.
New AllTrades-branded facilities promise to offer: updated designs with high-quality finishes and amenities; professional property management; high-profile infill locations in established communities; sufficient, secured and monitored parking that’s rented separately; full turnkey office and warehouse space; minimum ceiling heights of 19 feet, four inches; and 14-foot-wide and high doors.
AllTrades will develop the properties while AIP has an exclusive agreement to purchase its newly developed and leased facilities.
It will also extend mezzanine loans to AllTrades, covering a portion of the development costs for properties which AIP has provided forward purchase agreements.
AllTrades is developing new facilities in conjunction with co-investment from Trinity Investors, a Dallas-based private equity firm that invests in real estate and operating companies.
The relationship between Trinity and AllTrades will help accelerate the national rollout of facilities made available for AIP to purchase.
Ownership and operating structure
Vorwaller, Wulf (who’s Canadian) and Hall are owners of AllTrades and also own 15.8 per cent of AIP, while also serving as executive officers.
Wulf is the former CEO of BrightPath Early Learning Ltd. and Children’s Choice Learning Centers Inc. and was familiar with creating and growing business entities through the CPC format, a unique listing vehicle offered exclusively by the TSX Venture Exchange that provides an alternative mechanism for early-stage private companies to raise capital and go public.
A CPC pools capital among three or more qualified individuals and incorporates it under a shell company.
AIP has Toronto and Vancouver corporate office addresses and will eventually open a staffed Vancouver office.
Vorwaller said AIP investment has also come from “some fairly well-known institutionally oriented investors who like the idea of the business and its investment thesis and provided some deep capital to launch AIP Realty Trust with the view that they would become regular investors in future capital raises undertaken by AIP Realty Trust.”
AIP expects what it has to offer will attract investors due to: a stable and predicable cash flow; low tenant turnover; triple net leases; low operational risks; low maintenance costs; facilities that can serve a wide range of tenants; and a very limited amount of new supply being offered by other companies.
AIP announced a public offering of trust units on June 10 as a means of raising up to $25 million US, but decided on Aug. 17 not to move forward with it due to market volatility and unfavourable conditions.
The proceeds were to be used for the acquisition of completed AllTrades-branded properties and mezzanine loans to AllTrades towards the development of new facilities, as well as general corporate and working capital purposes.
“We’re now in the process of finalizing the details of some of the options that we’re going to be pursuing during the balance of the fall and into the early winter of this year to conclude a capital raise on behalf of AIP Realty Trust,” said Vorwaller, who noted AllTrades has existing access to private capital to support its development pipeline.
Development and acquisition pipelines
AIP has entered into forward purchase agreements for 12 light industrial flex properties and their respective companies in the Dallas-Fort Worth area.
These properties combine to comprise 841,109 square feet of leasable space and 339 parking spaces. Assuming all agreements proceed as planned, the total costs would be $282.3 million US.
While Dallas-Fort Worth is a natural location for AllTrades to establish a base because it’s headquartered there, Vorwaller said it’s also desirable because it has above national growth rates for population, jobs and gross domestic product as well as small businesses, trades and services that are the developer’s target tenants.
AllTrades’ future expansion markets include the Texas cities of Austin and Houston as well as central Florida.
Longer-term expansion will target urban areas with growing populations and thriving economies in Arizona, Georgia, Kansas, North Carolina, South Carolina, Tennessee and Utah.
The goal is for AllTrades to build about 10 facilities in each new market it enters and for AIP to own 100 of them within 10 years and significantly more than that beyond that period.