Horizontal skyscraper

Imagine the 39-story One Tampa City skyscraper in downtown Tampa tilted on its side, and a second tower of the same size next to it.

Combined, they don't equal the size of the two-building fulfillment center Los Angeles-based Majestic Realty Co. is developing for Wal-Mart Stores Inc., in Davenport.

At 2 million square feet, the project represents the largest private commercial real estate development underway along the Gulf Coast.

But it may also usher in a new wave of institutional interest in industrial assets in the Interstate 4 corridor between Tampa and Orlando, analysts say, spurred on by USAA Real Estate Co.'s recent disposition of a 1.02 million-square-foot property in Ruskin occupied by online retailer Amazon.com.

In that deal, completed last month, Phoenix-based Cole Office & Industrial REIT (CCIT II) Inc. spent $103.6 million in what was at the time a record for a single industrial asset sale in the Tampa area.

With Wal-Mart, investment interest would likely be just as frenzied — though Majestic insists it has no plans to sell the project at this time.

“This project is the result of new drivers coming to the area,” says Kostas Stoilas, an industrial real estate specialist with real estate services firm CBRE Inc., in Tampa. “And it's having a ripple effect, no question. I think we'll see even more e-commerce activity along the I-4 corridor as a result.”

The Wal-Mart fulfillment center could also open a door for Majestic to the Florida market. The company, the largest privately held industrial developer in the U.S. with a portfolio of more than 85 million square feet, previously developed a pair of buildings in Jacksonville several years ago for Mercedes-Benz and others.

But it hopes to leverage the 4900 and 5100 N. Ridge Trail buildings, in Polk County, to gain a foothold here.

“We fully plan to continue developing in Florida, and we're actively looking at a few sites in the state,” says Scott Brown, a Majestic Realty senior vice president in the company's Atlanta office who is leading the development in Davenport.

“With this, it was such a good site, with so many advantages, the location just made the deal,” he says.

Wal-Mart was drawn to the 180-acre site primarily because it will be able to serve roughly 18 million people within a 24-hour drive from its fulfillment center.

Brown says the 40-foot-clear height buildings, being developed at a cost of $150 million, will be completed by late autumn of this year. Wal-Mart is currently installing sophisticated racking, conveyor and material handling equipment in the buildings and could begin shipments as early as September.

“Because they'll be able to reach so much population so quickly, this project will almost have a retail dynamic to it,” Brown says. “And these buildings are going to be so sophisticated and specialized. Wal-Mart is spending so much time and money on the interiors of the boxes there.”

The Davenport project marks the second e-commerce-related facility that Majestic has constructed for Wal-Mart. It also built a 1.2 million-square-foot fulfillment center for the giant Arkansas-based retailer in Atlanta.

But unlike USAA's move involving the Amazon building in Ruskin, don't look for Majestic to shed the Davenport buildings anytime soon.

“We rarely sell anything,” Brown says of Majestic. “We typically create value by being long-term holders of commercial real estate, and we're not looking to turn around and flip this project, either. But we recognize that the investment market is very hot right now and cap rates are very low. There are some interesting valuations out there.”

Analysts say that if Majestic did decide to take the buildings to market, however, it would find a crowded field of investor interest.

“There's no better credit tenant than Wal-Mart,” says Deron Thomas, president of Industrial Realty Solutions Inc., a Safety Harbor commercial real estate brokerage firm. “And when a landlord can get $100 per square foot by selling a Class A industrial asset, those numbers are eye-popping. But they would be able to get it, because really what an investor is doing is betting on the company that's occupying the property.”

The project's location and other dynamics also would add to the potential sale value, brokers say.

“If it were to hit the market, between the credit-worthiness of Wal-Mart, the location of the asset and the lack of other like-quality inventory for sale, I think it would generate considerable interest,” says Rian Smith, a CBRE first vice president who specializes in I-4 corridor industrial properties.

Brown notes that while the speed and complexity of the Wal-Mart project have been challenging, along with finding enough qualified labor to build the facility, he credits Polk County officials with helping the project reach fruition.

“Had it not been for the Polk County Commission and staff, this project would not have happened with the alacrity it has,” Brown says. “A project of this size is pretty difficult to get out of the ground, but they have stepped up and responded to plans, aided in streamlining permitting and other things. I can't say enough about them.”

That feeling appears to be mutual.

“This is a great project for all of Polk County and for the region,” says Todd Dantzler, a Polk County Commissioner and commercial broker with CBC Saunders Ralston Dantzler Realty, in Lakeland.

“It's a testament to the locational quotient of real estate,” Dantzler adds. “But the economic development aspect of this can't be underscored. It's a warehouse Majestic is building, but the jobs there are skilled-labor jobs now, and they are going to need smart, conscientious people to fill them. I'm looking forward to Wal-Mart operating there for a long, long time.”

- K.L. McQuaid

The original information about the picture with this story misidentified Gary Wax.