ROOK
REAL ESTATE DEAL ANALYSIS & FINANCIAL MODELING
Pacolet Logistics Center — Single-Tenant Nnn
“A 6.65% NNN coupon today, marked to market in Year 4 — credit income with a built-in step-up.”
§1 · Investment Highlights
Why this deal, in six lines
96,000 SF single-tenant NNN · ~$89 / SF, below replacement
6.65% in-place cap; tenant pays taxes, insurance & CAM
2.5% annual escalators plus a Year-4 mark-to-market
12.1% LP IRR · 2.04x · DSCR 1.44x
Spartanburg inland-port logistics corridor
Deep 1031 / institutional exit pool
§2 · Executive Thesis
Own the building, pass through the operating costs, and reset rent to market at renewal
The deal in brief. Pacolet Logistics Center is a 96,000 SF single-tenant Class B distribution building leased NNN to a regional operator in the Spartanburg inland-port corridor. Acquired at a 6.65% in-place cap with below-market rent and a Year-4 mark-to-market, the deal returns a 12.13% LP IRR and 2.04x equity multiple over a 7-year hold while passing through operating-expense risk to the tenant.
Contractual Income
NNN lease passes taxes, insurance, and CAM to the tenant; landlord retains a structural reserve. Annual 2.5% escalators compound the coupon.
Mark-to-Market
In-place rent sits below the Upstate market; the Year-4 renewal resets rent to market, lifting NOI and exit value.
Logistics Tailwind
Inland-port adjacency and constrained Class B supply support tenant retention and a deep institutional/1031 buyer pool at exit.
§3 · Headline Returns — Base Case
Base-case returns, clearing the institutional hurdle
LP IRR
12.1%
Hurdle ≥ 10%
LP Equity Multiple
2.04x
7-year hold
Project IRR
12.6%
> LP IRR
DSCR · Year 3
1.44x
stabilized
Entry Cap
6.65%
in-place
Exit Cap
6.75%
disposition
§4 · Value Creation
Contractual escalators plus a Year-4 renewal carry NOI to $704K
NNN base rent of $6.30/SF escalates 2.5% annually with a Year-4 mark-to-market, carrying NOI from $570,300 to $704,201 while the tenant absorbs all operating-cost inflation.
| NOI bridge | Year 1 | Year 3 (stab.) | Year 7 (exit) | Lift |
|---|---|---|---|---|
| Net Operating Income | $570,300 | $599,524 | $704,201 | +23% |
Capital Stack — total project cost $8,878,625 · 65.0% loan-to-cost
Sources & Uses
| Uses | Amount |
|---|---|
| Purchase Price | $8,575,000 |
| Closing & Acquisition | $128,625 |
| Tenant Improvement / Leasing Reserve | $100,000 |
| Reserve | $75,000 |
| Total Uses | $8,878,625 |
| Sources | Amount |
|---|---|
| Senior Debt | $5,771,000 |
| LP Equity | $2,796,862 |
| GP Co-Invest | $310,763 |
| Total Sources | $8,878,625 |
§5 · Scenario Matrix — Six Capital & Exit Cases
The same acquisition under six structures — base, upside, downside, all-cash, refinance-and-hold, and early exit
One asset, modeled six ways: the base case, an upside and a downside stress, an unlevered all-cash case, a cash-out refinance-and-hold, and an early exit. The spread frames the risk envelope around the base case.
| Scenario | Structure / Exit | LP IRR | LP EM | Project IRR | DSCR | Hold |
|---|---|---|---|---|---|---|
| Base Case | Levered 65% LTC · sell Year 7 · exit 6.75% | 12.1% | 2.04x | 12.6% | 1.44x | 7-yr |
| Upside | Income +3% · exit 6.50% · Year 7 | 13.9% | 2.25x | 14.8% | 1.49x | 7-yr |
| Downside / Stress | Income -3% · exit 7.25% · Year 7 | 9.5% | 1.76x | 9.3% | 1.40x | 7-yr |
| All-Cash (unlevered) | No debt · sell Year 7 · exit 6.75% | 8.9% | 1.67x | 8.6% | n/a | 7-yr |
| Refinance & Hold | Cash-out refi Year 3 · hold to Year 10 | 12.1% | 2.49x | 12.5% | 1.54x | 10-yr |
| Early Exit | Levered · sell Year 5 · exit 6.75% | 11.8% | 1.67x | 12.1% | 1.44x | 5-yr |
Read-through. Even the downside stress and the unlevered all-cash case hold positive double-digit-adjacent returns, while the refinance-and-hold compounds the multiple over a longer hold — the deal is resilient, not leverage-dependent.
§6 · Replacement-Cost Arbitrage — Cost-to-Build vs. Acquisition
Acquired below the cost to build it new
Replacement-cost-new indicates a $9,830,000–$12,680,000 band (mid $11,040,000), before any value for the in-place income or operating platform. At $8,575,000 the buyer acquires -22% versus mid replacement cost — structural downside protection independent of the income thesis.
| Component | Low | Mid | High | Basis |
|---|---|---|---|---|
| Land / Site (8.2 ac industrial) | $1,400,000 | $1,640,000 | $1,900,000 | $/ac infill industrial land |
| Shell / Improvements (96,000 SF) | $7,680,000 | $8,450,000 | $9,600,000 | $80–$100/SF replacement cost new |
| Site Improvements (truck court, paving) | $450,000 | $550,000 | $680,000 | Replacement cost new |
| Tenant Improvements (in place) | $300,000 | $400,000 | $500,000 | TI allowance, new |
| Total Replacement Cost (new) | $9,830,000 | $11,040,000 | $12,680,000 | Sum, undepreciated |
| Acquisition Price | $8,575,000 | $8,575,000 | $8,575,000 | Rook primary offer |
| Acquisition vs. Replacement Cost | $-1,255,000 (-13%) | $-2,465,000 (-22%) | $-4,105,000 (-32%) | Green = below replacement (value); red = above |
Why it matters. Buying below the cost to reproduce the physical asset is a floor under value that rises with construction inflation over the hold.
§7 · Market Overview
Upstate South Carolina: inland-port logistics, constrained Class B supply
Executive Summary. The Spartanburg–Greenville Upstate corridor is one of the Southeast's deepest logistics markets, anchored by the Inland Port Greer rail facility, BMW's manufacturing complex, and an I-85 distribution spine. Class B single-tenant net-leased assets with credit tenancy trade in the mid-6% to 7% cap range, with constrained newer Class B supply supporting tenant retention.
Cap-Rate Environment. Quality industrial assets have compressed toward 5–6% in primary markets; secondary Upstate Class B single-tenant NNN clears ~6.25–7.0% depending on tenant credit and lease term. Portfolio investor demand and limited new Class B supply support stable pricing into 2026.
Demand Drivers. Supply-chain normalization and reshoring continue to favor Southeast logistics. Inland-port adjacency provides rail-served import/export access; the renter pool spans 3PLs, auto suppliers, and regional distributors. Net-leased structures insulate landlords from operating-cost inflation.
Implication for the Subject. Below-market in-place rent and a Year-4 renewal position the asset for a marked-to-market NOI lift, with a flat-cap exit into a deep 1031/institutional buyer pool — return driven by the credit coupon plus the rent reset, not cap-rate compression.
Cap-Rate Framework
| Upstate SC (Tier 2) Industrial NNN | Stabilized | Value-Add / In-Place |
|---|---|---|
| Single-tenant NNN — investment-grade | 5.50 – 6.25% | — |
| Single-tenant NNN — Class B / regional | 6.25 – 7.00% | 6.50 – 7.25% |
| Flex / multi-tenant industrial | 7.00 – 8.00% | — |
| Subject — Class B NNN, regional credit | 6.75% exit | 6.65% in-place |
§8 · Highest & Best Use
The maximally productive use
Single-tenant NNN hold + mark-to-market
~12.1%
Maximally productive — credit coupon plus rent reset.
Multi-tenant flex conversion
~9–10%
Higher management intensity; dilutes the NNN premium.
Owner-user sale
~contingent
Narrower buyer pool; timing-dependent.
§9 · Valuation — Triangulated CMA
Reconciled at $8.9M; we enter at $8.575M ahead of the reset
Low
$8.0M
cost-floor weighted
Midpoint
$8.9M
reconciled opinion
High
$9.6M
sales-comp weighted
Income approach (55%) · Sales comparison (35%) · Cost approach (10%). Rook primary offer $8.575M.
Comparable Sales — illustrative composites
| # | Status | Location | Detail | $/SF | Cap | Adj. Note |
|---|---|---|---|---|---|---|
| 1 | Sold | Greenville, SC | 104,000 SF, 2008, NNN | $92/SF | 6.6% | Similar; no adj. |
| 2 | Sold | Spartanburg, SC | 128,000 SF, 2001 | $84/SF | 6.9% | Older; +4% adj. |
| 3 | Sold | Greer, SC | 88,000 SF, 2012, NNN | $101/SF | 6.3% | Superior; −5% adj. |
| 4 | Active | Spartanburg, SC | 96,000 SF, 2003 | $90/SF | 6.7% | Direct comp. |
| 5 | Sold | Duncan, SC | 140,000 SF, 1999 | $80/SF | 7.1% | Scale; +3% adj. |
§10 · Financial Projections
NOI, levered cash flow, and coverage
| Year | EGI / Revenue | NOI | Levered CF | DSCR |
|---|---|---|---|---|
| Year 1 | $604,800 | $570,300 | $155,099 | 1.37x |
| Year 2 | $619,920 | $584,730 | $169,529 | 1.41x |
| Year 3 | $635,418 | $599,524 | $184,323 | 1.44x |
| Year 4 | $690,000 | $653,388 | $238,187 | 1.57x |
| Year 5 | $707,250 | $669,906 | $254,705 | 1.61x |
| Year 6 | $724,931 | $686,840 | $271,639 | 1.65x |
| Year 7 | $743,054 | $704,201 | $289,000 | 1.70x |
Sensitivity — LP IRR by price × exit cap
| Price \ Exit Cap | 6.25% | 6.50% | 6.75% | 7.00% | 7.25% |
|---|---|---|---|---|---|
| $7,889,000 | 16.3% | 15.5% | 14.8% | 14.1% | 13.4% |
| $8,232,000 | 15.0% | 14.2% | 13.5% | 12.7% | 12.0% |
| $8,575,000 | 13.7% | 12.9% | 12.1% | 11.4% | 10.6% |
| $8,918,000 | 12.5% | 11.6% | 10.8% | 10.0% | 9.2% |
| $9,261,000 | 11.2% | 10.4% | 9.5% | 8.6% | 7.7% |
Green ≥ 10% · Yellow 6–10% · Red below. Base case shaded center.
§11 · Annual Distributions to LP & GP
How the European waterfall splits each year's distributable cash
| Year | Distributable | To LP | To GP |
|---|---|---|---|
| Year 1 | $155,099 | $139,589 | $15,510 |
| Year 2 | $169,529 | $152,576 | $16,953 |
| Year 3 | $184,323 | $165,891 | $18,432 |
| Year 4 | $238,187 | $214,369 | $23,819 |
| Year 5 | $254,705 | $229,235 | $25,471 |
| Year 6 | $271,639 | $244,475 | $27,164 |
| Year 7 | $5,235,540 | $4,557,959 | $677,581 |
| Total | $6,509,024 | $5,704,094 | $804,930 |
§12 · LP Waterfall — European Structure
A 7% preferred to the LP — the GP promotes only above a 10% LP IRR
| Tier | Mechanics | Split (LP / GP) |
|---|---|---|
| 1 · Return of Capital | Pro-rata to LP & GP | 100% capital |
| 2 · Preferred Return | 100% to LP until 7% LP IRR | 7% pref |
| 3 · First Promote | To a 10% LP IRR | 80 / 20 |
| 4 · Second Promote | To a 14% LP IRR | 70 / 30 |
| 5 · Residual | Thereafter | 65 / 35 |
Outcome. LP 12.1% IRR / 2.04x · GP 16.2% IRR / 2.59x (promote earned only above the hurdles) · Project 12.6% IRR. LP and GP distributions reconcile to total distributable to the dollar.
§13 · Risk Register
Tenant credit and the Year-4 renewal are the value levers
| Risk / Exposure | Adverse Impact | Mitigant |
|---|---|---|
| Tenant credit / financials review | −$300K to −$700K | Tenant credit drives cap rate and financeability. |
| Lease abstract & renewal economics | −$200K to −$500K | Mark-to-market assumption depends on renewal terms. |
| Roof & structural condition (PCA) | −$150K to −$350K | Class B shell; deferred capital risk. |
| Environmental (Phase I, industrial use) | −$50K to −$250K | Prior industrial use; RECs possible. |
| Property-tax reassessment on transfer | −$60K to −$150K | Reassessment affects NNN reconciliation. |
§14 · Asset Inventory
Component value — Cost Approach
| Component | Value | Basis |
|---|---|---|
| Land / Site (8.2 ac industrial) | $1,640,000 | $200,000/ac infill industrial land |
| Shell / Improvements (depreciated) | $6,240,000 | $95/SF replacement less 23% depreciation |
| Site Improvements (truck court, paving) | $520,000 | Replacement less depreciation |
| Tenant Improvements (in place) | $360,000 | Depreciated TI allowance |
| Total | $8,760,000 | — |