Developer widens hold in Maryland Warehouse owner Security Capital buys Arbutus business park

'Continues our strategy'

Denver-based REIT wants to be top provider of space to corporations

July 05, 1996|By KEVIN L. McQuaid | KEVIN L. McQuaid,SUN STAFF

The nation's largest owner of industrial real estate is continuing its blaze into the Baltimore area, buying the five-building DeSoto Business Park in Arbutus for roughly $10.5 million.

The acquisition this week of the 524,000-square-foot warehouse project marks Security Capital's second local purchase in as many weeks, following on the heels of a $5.6 million deal for 47 undeveloped acres in the Elkridge section of Howard County.

There, the Denver-based real estate investment trust intends to construct a 225,000-square-foot distribution center beginning this summer. In all, the REIT has the ability to develop $25 million worth of new industrial space within the Meadowridge Business Park.

"This continues our strategy of buying well-located, functional distribution product," said David L. Welch, a Security Capital vice president, of the DeSoto deal. "And at Meadowridge, we got some of the best land located in the Baltimore/Washington corridor to meet the needs of both regional and national customers."

The purchases also are part of Security Capital's plan to become a sole-source provider of distribution space for Fortune 1000 companies. As of April 30, the trust controlled 76.2 million square feet nationwide valued at more than $1.8 billion -- more than double from two years ago.

It has maintained that pace in the Baltimore/Washington region as well. In the 19 months since Security Capital came East with a $37 million purchase of 12 buildings in Landover and Alexandria, it has bought or is developing six projects totaling 2.5 million square feet -- enough to fill more than eight skyscrapers.

"They're gaining critical mass from which to pivot from," said David P. Scheffenacker Jr., president of real estate brokerage firm Preston Partners Inc., who together with Robert S. Clements has represented Security Capital in two Baltimore transactions.

Its first Baltimore-area development project, a two-building speculative distribution center in Linthicum, will be completed in October. The $12 million Airport Commons project, as it is known, will add 305,000 square feet to the market.

But Security Capital isn't content to build from the ground up. The company also is buying older, underutilized buildings in need of repairs and capital improvements.

Such was the case with DeSoto and a 96,700-square-foot building at 2801 W. Patapsco Ave. on the outskirts of the city. There, Security Capital has fixed the roof, upgraded the landscaping and made other improvements. At DeSoto, the company plans to invest roughly $2.5 million.

"We're looking for buildings that we can find below their replacement costs, that are functional, that serve local distribution customers and that we can add value to," Welch said. "And we think there's a real synergy between owning new and old projects, because that way we can meet the needs of a wide variety of customers."

The company also is building space for others, as it did with a 150,000-square-foot project for Hitachi Data Systems in Laurel.

And by banking land in Landover, Elkridge and Northern Virginia, Security Capital is accumulating acreage that will mean projects for years to come.

The company has one other major advantage over traditional warehouse developers: Access to Wall Street capital. With public financing, Security Capital can fund expansion, build new projects and even lower rental rates against the competition.

"They're establishing a beachhead here, the properties are in good locations and in many cases are already income producing," Scheffenacker said.

Pub Date: 7/05/96

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