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FabSouth Sale-Leaseback Portfolio10 Industrial Properties | $5.0M NOI | 1.3 MSF | 20-Year Term
Atlanta · Deltona/Daytona · Eastern NC · Fort Lauderdale · Greenville · Victoria · Waco · Winston-Salem · Yakima
Confidential Investment Introduction
FabSouth Project (Steel Fabricators LLC)Inter Miami CF Stadium
THE OFFERINGJLL, on behalf of American Industrial Partners (“AIP” or “Sponsor”), is pleased to offer the FabSouth Sale-Leaseback Portfolio (“Portfolio” or“Properties”), which totals 1.3 MSF across 10 industrial properties and will be subject to a 20-year lease term commencing at close of escrow. ThePortfolio will be 100% leased to FabSouth LLC (“FabSouth” or “Tenant”), a leading steel fabricator with a differentiated multi-facility business modeland strong presence in the Southeast U.S. The Properties are strategically situated within six states, with 20% of the initial rent attributed to assets inFlorida, and another 25% to locations in Texas. Additionally, 43% of the NOI is attributed to Properties in well-established, infill markets withapproximately 100 MSF of industrial inventory or greater. This offering represents a rare opportunity to acquire a mission-critical Portfolio of scale,featuring resilient tenancy, passive income growth, and geographic diversity.
2 | FabSouth sale-leaseback portfolio2 | FabSouth sale-leaseback portfolio
INVESTMENT OVERVIEWINVESTMENT SUMMARYTENANT / GUARANTOR FabSouth, LLC
INITIAL LEASE TERM 20 years
OPTION PERIODS 4 x 5-year renewal options
LEASE STRUCTURE Absolute NNN (no landlord responsibilities)
PORTFOLIO STRUCTURE Master Lease Agreement
TOTAL SIZE 1,353,000 SF
TOTAL INITIAL RENT* $5,001,410 ($3.70 PSF)
ESCALATIONS 2.25% escalations
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* See “Portfolio Composition” table for breakdown
PORTFOLIO COMPOSITION
# Entity Address City Market ST SF Acres Initial Rent PSF
Initial Rent
(Annual)1 Steel Fabricators, LLC 721 NE 44th St Fort Lauderdale Fort Lauderdale FL 85,085 5.0 $7.00 $595,600
2 Fabco Metal Products 1490 Frances Dr Daytona Beach Deltona/Daytona FL 68,853 17.9 $6.25 $430,330
3 Steel, LLC 405 North Clarendon Ave Scottdale Atlanta GA 139,397 9.0 $4.25 $592,440
4 Lyndon Steel Co 1947 Union Cross Rd Winston-Salem Winston-Salem NC 111,800 15.1 $3.50 $391,300
5 Lyndon Steel Co 216 Junia Ave Winston-Salem Winston-Salem NC 18,500 1.8 $2.50 $46,250
6 Lyndon Steel Co 2300 Albemarle Paper Co. Rd Kinston Eastern NC NC 95,000 10.6 $2.50 $237,500
7 SC Steel 114 Warehouse Ct Taylors Greenville SC 155,500 23.5 $3.25 $505,380
8 Alamo Structural Steel 255 Skytop Rd Victoria Victoria TX 248,500 26.9 $2.75 $683,380
9 Alamo Structural Steel 2784 Old Dallas Rd Waco Waco TX 172,000 18.8 $3.35 $576,200
10 SunSteel, LLC 2099 Sheller Rd Sunnyside Yakima Valley WA 258,365 37.0 $3.65 $943,030
Portfolio Totals 1,353,000 165.6 $3.70 $5,001,410
BACKGROUNDFabSouth is a leading manufacturer of structural steel, with a unique,multi-plant business model that provides superior operationalflexibility and financial performance. The FabSouth platform wascreated in 2014 with the combination of four structural steelfabricators. From 2014-2018, FabSouth added four additional locationsthrough a combination of organic and inorganic expansion, creating thecurrent platform. In 2009, FabSouth was acquired by Canam Group, aCanadian public company, which was subsequently acquired by AIP in2017. Today, FabSouth operates as an independent, standalonecompany under AIP ownership.
LONG-TERM LEASE WITH PASSIVE STRUCTURE
The offering will be truly passive in nature, with no landlord responsibilities for expenses, repairs, orreplacements. The absolute triple-net master lease structure and annual 2.25% rental escalationsprovide an attractive and rising income stream over the 20-year initial term.
GROWING, DIFFERENTIATED TENANT
FabSouth is one of the largest structural steel fabricators in the country and goes to market underthe brand identities of eight constituent companies. This approach provides competitive advantagesin procurement, shared services, and leveraging operational best practices. The Tenant boasts ahigh degree of project diversification and minimal project concentration yet has attractive exposureto secular growth in e-commerce distribution infrastructure. The average project size is under $2million, and of the 1,000+ projects completed in 2019, the top 10 only accounted for 30% of the totalrevenue. Business from customers is typically more repeatable and consistent. Over the past two fullyears, FabSouth’s top line grew by a CAGR of 15.7%, and full-year 2020 is expected to show a revenueincrease of 27.6% over 2019. FabSouth is uniquely positioned to continue strengthening viainvestments in automation, operational improvements, and end-market tailwinds.
MISSION-CRITICAL MANUFACTURING FACILITIES
The Properties represent 98% of FabSouth’s total revenues (before eliminations), underscoring theimportance of the entire Portfolio. They house over 1,400 employees combined who are expected tocomplete 1.8 million shop hours in 2020. The Tenant has also made over $15 million in recentinvestments in capacity and automation to position the business for accelerated growth in the top-line and profitability, plus annual maintenance capex of approximately $3.5 million. The low overallFloor Area Ratio (FAR) of 0.2 reflects the Tenant’s need to have relatively large outdoor storage areas,and the Portfolio sale will convey ±165 acres to an investor. Additionally, as freight is an importantconsideration in shipping steel, FabSouth’s locations are strategic to keep related costs low. Exitingany of the plants would significantly disadvantage FabSouth from a competitive bidding standpoint.
INVESTMENT HIGHLIGHTS
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STRONG UNIT-LEVEL COVERAGE
The ratio of TTM EBITDA (through August 2020) to proposed rentacross the Portfolio is incredibly strong at 11x, and no site’s unit-level EBITDA coverage is below 3.5x. Further, the total proposedrent represents only 0.6% of TTM Revenue over the same period.Since the total rent for the Portfolio will be guaranteed under amaster lease agreement, an investor will receive added securitywith respect to the contractual lease payments. The seven brandsthat are based out of these Properties have an average operatinghistory exceeding 55 years (including predecessor entities) andhave extensive histories at each site, which lends to the likelihoodof continued, healthy site-level performance.
GEOGRAPHIC DIVERSITY
The Properties are based in six states, with the majority located inthe Southeast U.S. Shared plant capacity across this footprintenables superior utilization and reduces sub-fabrication expenses.The metropolitan areas surrounding the sites have experiencedamong the highest population growth rates in the country, namelythe Texas and Florida locations, and world-class infrastructure. Aninvestor purchasing the Portfolio will receive exposure to ninedifferent industrial markets having an average inventory size of132.6 MSF, vacancy rate of 5.8% (on par with the national level), andgross market rental rate of $6.81 PSF. Included in these ninemarkets are especially desirable industrial pockets of Greenville(132.9 MSF), Fort Lauderdale (136.8 MSF), and Atlanta (740.8 MSF).The average population and household income within a 5-mileradius of the Properties is ±118,000 and ±$70,000, respectively.
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Atlanta Hartsfield-Jackson International Airport
2019-2020 Pedestrian Bridge Project | Steel, LLC
6 | FabSouth sale-leaseback portfolio
TENANT INTRODUCTIONTENANT / GUARANTOR FabSouth, LLCYEAR FOUNDED 2004, with individual business units dating to 1947INDUSTRY SEGMENT Structural steel fabrication for non-residential constructionCUSTOMERS Typically general contractors and construction managersREVENUE DIVERSIFICATION
2019 revenue consisted of 1,000+ projects, of which the top 10 represented only 30% of the total
CAPACITY Total annual capacity of 1.8+ million fabrication hoursEMPLOYEES 1,400+ (±70% shop employees)
TYPICAL CONTRACTS Primarily fixed price contracts, most of which are completed within 6-9 months; average project is < $ 2 million
END MARKET MIX±40% of 2020F revenues expected to be derived from ecommerce/warehouse projects; remainder includes manufacturing, healthcare, educational and institutional, and other commercial projects
FabSouth is a leading structural steel fabricatorconsisting of eight brand identities under thecorporate umbrella. The Tenant’s multi-facilityfootprint provides a distinct advantage over itscompetitors, who are generally smaller, single-plant fabricators. Additionally, this structureenables FabSouth to optimize bid strategies andshare plant capacity, yielding more optimalutilization rates and cost efficiencies. FabSouth’sfocus is on small and medium-sized jobs, whichprovide the Tenant with consistent profitabilityand a diversified customer base across severalend-markets and geographic regions.
FABSOUTH PLATFORM
2004 2009 2014 2017 2018 2020
Initial companies combined to create FabSouth platform
SunSteel and Mid-State Metals started as greenfield companies
under the FabSouth platform
FabSouth acquires SC Steel and Alamo Steel from Commercial Metals
Canam acquires initial ownership interest FabSouth
Canam taken private by AIP, the Dutilfamily and other Quebec-based investors
Separation of FabSouth from Canamfollowing sale of Canadian operations
to minority shareholders
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REPRESENTATIVE FABSOUTH PROJECTS
BMW of Delray Beach, FL
Gulfstream Assembly Plant – Savannah, GA
Cherokee Indian Hospital – Cherokee, NC
Airplane Hangar – Pacific Northwest
Amazon – Kent, WA
200 E Randolph Street | Chicago, IL 60601
www.us.jll.com/capitalmarkets
Copyright © Jones Lang LaSalle IP, Inc. 2020
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Any opinion or estimate of value of any asset in this presentation is based upon the high-level preliminary review by JLL. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice. JLL expressly disclaims any liability for any reliance on any opinion or estimate of value in this presentation by any party.
Brandon Chavoya Managing Director JLL Capital Markets+1 214 679 [email protected]
DEBT AND FINANCE SUPPORT
Steven Okon Vice PresidentJLL Capital Markets+1 773 339 [email protected]
ADVISORS
Brian Shanfeld Sr. Managing DirectorJLL Capital Markets+1 847 370 [email protected]
Jason DeWittSenior DirectorJLL Capital Markets+1 703 863 [email protected]
DEBT AND FINANCE SUPPORT
Truman TiernanAnalystJLL Capital Markets+1 773 983 [email protected]
Contacts