FSX Industrial 34, DST

Overview

A two-property, single-tenant absolute-NNN industrial portfolio (995,781 SF total) acquired through a leveraged DST, diversified by geography and tenant. Property 1 is a 680,508 SF build-to-suit distribution hub at 380 Estill Baker Road, Hanson KY (54.8 acres, built 1998 / expanded 2009, up to 70-foot clear heights, 48 dock doors), serving as Carhartt's primary national SKU facility, into which Carhartt has invested over $70 million in robotics, racking, and conveyor automation plus $1 million-plus of annual capex since 2015; the lease has 11.8 years remaining, 2.50% annual escalations, and eight 5-year renewal options. Property 2 is a 315,273 SF warehouse/manufacturing/office facility at 1730 East Main Street, Duncan SC (30.3 acres, built 1980 / expanded 2011, 29-31-foot clear heights), leased to Eaton Corporation (NYSE: ETN) for its Electrical segment and occupied since 1984, in the institutional Greenville-Spartanburg market (Spartanburg West submarket, 2.6% vacancy, inland-port and I-85 access); the lease has 11.9 years remaining, 2.00% escalations, and five 5-year options. The portfolio carries an 11-plus-year WALT and was acquired for $86,400,000 (First Year property-level NOI of $5,447,009), capitalized with $50,200,000 equity and a $47,520,000 Old National Bank first mortgage (7-year term, SOFR+1.95% swapped to a fixed 5.495%, interest-only for 48 months then 30-year amortization, nonrecourse). Distributions are monthly, beginning at a 5.05% annualized cash-on-cash yield. Both tenants' credit is rated 'good' by Alliance Research; Eaton is an investment-grade public company and Carhartt is a privately held, century-old workwear manufacturer. Sponsored by Four Springs TEN31 Xchange (founded 2014); securities offered through Third Seven Capital, LLC and distributed by Four Springs Capital Markets.

Investment highlights

• The portfolio's credit profile is a barbell of one transparent, investment-grade public credit and one strong but opaque private credit. Eaton Corporation (NYSE: ETN) is a globally diversified, century-old power-management company serving customers in over 170 countries, providing rated, publicly reported counterparty strength on the Duncan SC asset. Carhartt is a privately held, 135-year-old workwear manufacturer whose creditworthiness rests on a sponsor-commissioned Alliance Research review rated 'good' rather than a public agency rating, so the larger of the two assets by footprint carries materially less credit transparency, and both leases are with the operating tenants.
• Both assets are demonstrably mission-critical to their tenants, which raises renewal probability and switching costs well above a generic warehouse. The Hanson KY facility is Carhartt's primary national SKU distribution hub, into which the tenant has sunk over $70 million of fixed automation (robotics, racking, conveyor) plus more than $1 million of annual capital since 2015, embedding the operation in the building. Eaton has occupied Duncan SC continuously since 1984 and funded a roughly $5 million, 127,000 SF expansion, reflecting four decades of operational entrenchment.
• The lease economics are durable and long-dated: absolute-NNN structure with minimal landlord responsibility, an 11-plus-year weighted-average remaining term (11.8 and 11.9 years), contractual escalators, and unusually deep renewal optionality (eight 5-year options at Carhartt extending up to 40 years, five 5-year options at Eaton extending up to 25 years). The qualifier is that the 2.00% to 2.50% escalators sit at or below long-run inflation expectations, so real income growth is limited and the blended roughly 2.35% step-up modestly lags a higher-for-longer cost environment.
• Submarket quality is asymmetric across the two assets. The Eaton property sits in the Greenville-Spartanburg industrial market's largest submarket (Spartanburg West), a top-tier institutional logistics corridor with a record-low 2.6% vacancy rate, 5.1% availability, inland-port access at Greer, and I-85 frontage, supporting strong re-leasing economics. The Carhartt property, while logistically well-connected (I-69, CSX rail interchange, Ohio River ports, central to Carhartt's Kentucky manufacturing cluster), is in a rural, tertiary Western Kentucky location where alternative-tenant demand is thin if the incumbent ever vacates.
• The financing structure generates positive leverage and, atypically for the ledger, builds principal equity. The $47.52 million Old National Bank loan is swapped to a fixed 5.495% against the in-place yield at 48.63% loan-to-capitalization, and amortizes on a 30-year schedule beginning in year 5, so investors accrete modest equity through the back half of the hold rather than facing a full interest-only balloon. The offset is that the interest-rate swap introduces breakage and termination cost if the assets are sold or the loan is prepaid, and scheduled amortization lifts annual debt service from roughly $2.65 million to about $3.27 million in years 5 through 7, compressing coverage.

Sponsor

This offering is sponsored by Four Springs Capital. Baker 1031 Investments is independent of the sponsor and provides advisory and brokerage services to accredited investors.