Property Description

The property is a 278,000 SF industrial facility located in Huntsville, AL. The property is 100% leased and occupied by Dynetics, Inc. (“Dynetics”), a wholly owned subsidiary of Leidos (NYSE: LDOS). Dynetics uses the facility for research and development and to manufacture products for the U.S. Government.

  • We acquired the property in December 2020 for $19.9 million. The property is 100% leased through February 2030. The property is comprised of 26,450 SF of office space and 251,550 SF of distribution, R&D, and manufacturing space. The facility was constructed in 2001 and substantially renovated in 2018.
  • The Property is in Huntsville, AL and is well-located near the Redstone Arsenal, new Toyota-Mazda plant, and I-65 , I-24, and I-59, which serve as regional connectors linking Chattanooga, Huntsville, Nashville, Birmingham, Montgomery, Atlanta, and Mobile.
  • The going in or “cash” cap rate was 6.83%. The average or GAAP cap rate was 7.50%.

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Investment Thesis

  • Long term lease with high probability of lease renewal
    • At the time of acquisition, the property had nearly 10 years of remaining lease term
    • The tenant invested more than $10 million (over half our acquisition price) of its own capital to improve and build out the space, indicating the tenant’s commitment to the property
    • The property contains imbedded Sensitive Compartmented Information Facility (“SKIF”) space paid for by the Tenant
    • The property serves multiple contracts including one of the tenant’s largest contracts
  • Quality tenant backed by investment-grade parent limits credit risk
    • The property is 100% occupied by Dynetics, an industry-leading applied research and national security solutions company that largely serves NASA and the Department of Defense
    • Shortly before we purchased the property, Dynetics was acquired by Leidos (S&P BBB- rated), a Fortune 500® information technology, engineering, and science solutions and services leader supporting vital missions for government and commercial customers
  • Opportunity to acquire an institutional quality industrial asset with good re-leasing potential in a growing market
    • The facility is well situated in the Chase Industrial Park and is one of the only properties in the immediate area with complete secure fencing, 24-hour security, and top-secret capable secure areas, which would be attractive to other regional defense contractors in the event the tenant were to vacate
    • The Huntsville market has seen tremendous investment from non-defense industry players, which should continue to expand the local user base
    • The property is very functional for various users with clear heights of 36’, 21 dock doors, ESFR sprinklers and 6,000 amps of power input

Market Description

The Property is located within the Huntsville/Decatur industrial market, a MSA with a diverse economy and concentrated technology (R&D) and advanced manufacturing operations. Huntsville, coined “Rocket City,” is a primary technology hub for both Alabama and the greater Southeast. The MSA benefits from the 7,000-acre Port of Huntsville, which includes the Huntsville International Airport and International Intermodal Center.

The metro also boasts the U.S. Army/Redstone Arsenal base which employs more than 45,000 civilian and contract employees. The military base has attracted and retained the presence of major government defense contractors in the tech and advanced manufacturing sectors. Some of the largest players include Boeing, BAE, Polaris, NASA, Lockheed Martin, GE Aviation, Northrop Grumman. Additionally, Blue Origin, a rocket company founded by Jeff Bezos, opened a $200 million manufacturing plant in Huntsville in early 2020.

Tenant Description

Dynetics, a wholly owned subsidiary of Leidos, is a leading defense and aerospace contractor serving various military and intelligence branches as well as NASA. The company’s offerings include highly specialized technical services and a range of software and hardware products, including components, subsystems, and complex end-to-end systems. 

Dynetics employs more than 3,000 people and is headquartered in Huntsville. The company’s portfolio consists of four primary segments:

  • Hypersonics
  • Force Protection
  • Advanced Solutions
  • Space

In January 2020, Leidos acquired Dynetics for $1.65 billion. Leidos is a Fortune 500® technology, engineering, and science solutions and services provider employing 45,000 people.

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