Retail-to-Industrial Conversion Along I-75

Property Gallery 6 Photos

Building 100, Converted Location & I-75 Access Site Plan

‍

‍

THE OPPORTUNITY

A Former Retail Power Center Converted to Industrial Use

The adaptive reuse of large-format retail into industrial space has become one of the more compelling repositioning stories in commercial real estate. When an anchor-driven retail power center loses its anchors, the result is often a sprawling, underutilized site with existing infrastructure, deep truck courts or parking fields, and flexible building shells that are poorly suited to retail re-tenanting but well-suited to light industrial, distribution, and flex warehouse tenants. The property at 2525 Pio Nono Avenue in Macon, Georgia is an example of that transition executed with speed and conviction.

The property was acquired by the sponsor in September 2020 for $4,700,000. It had previously served as a retail power center anchored by Walmart and Home Depot, and had been re-zoned for industrial use at the time of acquisition. Over the following twelve months, the sponsor invested more than $5 million into the property to convert its existing structures for industrial occupancy and begin active leasing. The results were striking: at the time RRA began its underwriting, the property was approximately 30 percent leased. By the time the loan closed in August 2021, occupancy had reached 88 percent, with six tenants in place across the building's 381,773 square feet.

The loan was structured around a partner buyout. The sponsor's equity partner held the investment through a fund that was approaching the end of its life, and the partner sought to exit at a price the sponsor found compelling. RRA's loan financed the buyout of that equity interest alongside a holdback for remaining capital expenditures and leasing costs, providing the sponsor with a clean capital structure and time to complete the lease-up and determine the optimal long-term disposition path.

THE PROPERTY

381,773 SF Multi-Tenant Industrial Park on 44.86 Acres, with 20 Acres of Excess Parking Available for Additional Monetization

The property's improvements were originally constructed in 1980, with additions completed in 1985, 1987, and 1995. The total rentable area of 381,773 square feet is spread across 10 rentable spaces ranging from approximately 3,800 to 112,700 square feet, providing a range of unit sizes suited to tenants from small-bay users through large-format industrial occupants. Clear heights across the building range from 16 to 24 feet, consistent with the requirements of the light industrial, distribution, and storage tenants that had been leasing in the submarket.

The 44.86-acre site is meaningfully larger than the buildings it supports, leaving approximately 20 acres of excess paved parking area available for alternative monetization. At closing, the sponsor held an executed letter of intent from a parking and storage operator for approximately 5 acres of that excess area, creating a potential revenue stream independent of building leases. The site's configuration, born from its prior retail use with generous surface parking ratios, was becoming an asset under industrial use where vehicle storage, truck parking, and overflow staging are in active demand.

At closing, the property was 88 percent leased to six tenants representing a cross-section of industrial users: a large-format door and millwork manufacturer occupying the single largest suite, a consumer goods wholesaler in the second-largest space, a building products and storage group, a national furniture and appliance retailer, a county government agency using space for elections operations and storage, and a small-parcel delivery operator. The combined weighted-average lease term for in-place tenants was approximately 5.1 years, providing stability across the bulk of the rent roll. Three smaller suites totaling approximately 12 percent of the rentable area remained available for lease-up under the business plan.

The property is located at the corner of US Route 80 and US Route 41 in Macon, Georgia, approximately 77 miles southeast of Atlanta. US Route 41 connects directly to Interstate 75, which runs north to Atlanta and south through several growing Florida markets including Tampa. Access to Interstate 16 adds a further east-west connection, positioning Macon as a logistics junction for freight moving between the Southeast's major population centers.

THE RRA SOLUTION

$12,445,000 First-Position Bridge Loan Financing a Partner Buyout and Remaining Lease-Up Capital

RRA structured a $12,445,000 first-position bridge loan to finance the partner buyout, fund remaining capital expenditures, and provide an interest reserve to support debt service during the final phase of lease-up. The loan was funded in two components: an initial disbursement of $11,560,000 at closing, representing $30.28 per square foot, and a holdback of $885,000 for capital expenditures and tenant improvement and leasing cost reimbursements. A $400,000 interest reserve was included within the initial funding to supplement cash flow in Year 1.

EXECUTION

Continued Lease-Up, CapEx Deployment, and Active Asset Management Through the Loan Period

Following closing, the sponsor continued to execute on the remaining lease-up, targeting the three vacant suites and advancing negotiations with the parking and storage operator who had expressed interest in the excess land area. The CapEx holdback funded one advance of $326,500 to support continued property improvements, including paving and parking remediation work identified in the property condition report. RRA's interest reserve provided a buffer during the period when lease-up was not yet complete and in-place cash flow did not fully cover debt service.

The Macon industrial submarket supported the leasing effort. With 7.4 million square feet of total inventory, a vacancy rate that had declined over four consecutive quarters to 4.7 percent, and quarter-to-date rent growth of 6.4 percent, the submarket's fundamentals created real demand for the space the sponsor was offering. New industrial construction in the specific submarket was effectively nonexistent, meaning no new supply was competing for the tenants the sponsor was pursuing. The property's location at the intersection of two US routes with immediate Interstate 75 access made it a viable option for distribution-oriented tenants that needed both building functionality and regional connectivity.

THE EXIT

Loan Repaid in Full, December 2021

The loan was repaid in full on December 17, 2021, approximately four months after origination. All accrued interest and the contractual exit fee of 1.0 percent were collected at payoff. Only one CapEx advance had been drawn prior to repayment, reflecting the efficiency of the sponsor's execution.

The speed of the payoff illustrated the quality of the underlying repositioning. A former retail power center that had been successfully converted to industrial use, leased to 88 percent occupancy at closing, and positioned on a 44-acre site with meaningful optionality on excess land is a compelling asset for permanent lenders. The strength of the collateral and the in-place cash flow made long-term refinancing a straightforward proposition, and the sponsor was able to move into permanent capital within months of the bridge loan closing. RRA's loan provided the certainty of execution to complete the partner buyout on the sponsor's timeline, and the short hold period reflected the value of that positioning work.