Global conglomerate, technology innovator and a long-ranking Fortune 100 company, 3M is a leading manufacturer of consumer and industrial goods across numerous industries, including healthcare, transportation and electronics.
Modiv’s portfolio includes a single-tenant net lease industrial property in DeKalb, Illinois, located on the western edge of the Chicago metropolitan area, which operates as a global distribution hub for 3M.
The property was acquired in 2017 with a short lease and below market rents. Understanding that the property is located in a desirable industrial area and that 3M occupied two adjacent properties making our property an especially critical location for this production and distribution hub, the Modiv team set out to maximize the value being “left on the table.”
We worked with 3M to find a solution that provided them with continued and long-term use of a strategically important facility in their production cycle while also creating value for our shareholders. The result was a 12-year triple-net lease extension with a substantial rent increase, growing our rental revenue with a desirable tenant and benefitting our investors.
This case highlights the importance of due diligence in transactions, properly valuing properties, understanding market fundamentals and the ability to successfully negotiate with our tenant partners.
- Originally developed in 2007 as a build-to-suit, the property is a Class A distribution center with 396,000 sq. ft. of warehouse space and 14,000 sq. ft. of office space.
- Located on the western edge of the greater Chicago MSA, this property represents a critical component of 3M’s three-building global distribution hub.
- Because this location is a key component of the success of 3M’s global distribution efforts, it fits Modiv’s goal of acquiring, owning and managing single-tenant, net-lease and mission-critical properties.
3M at a Glance
- Headquartered in St. Paul, Minnesota, 3M was founded as a small mining venture called Minnesota Mining and Manufacturing Company.
- The manufacturer’s most well-known consumer brands include Post-it® notes, Scotch™ tapes, Scotch-Brite™ abrasive products, Filtrete™ home air filters and ACE™ bandages.
- 3M ranks #96 on the Fortune 500 with over $32 billion in revenues. The manufacturer has appeared on the annual ranking of America’s largest companies for 65 years.
- In the United States, 3M operates 64 manufacturing facilities in 29 states.
- 3M is one of the companies included in the Dow Jones Industrial Average.
- The manufacturing giant has been recognized on a number of Forbes lists, including the Global 2000 2020, World’s Best Employers 2019, Top Regarded Companies 2018 and America’s Largest Publicly Traded Companies 2018.
At Modiv, we know real estate is an integral part of all communities and we actively choose to invest in properties that house the companies that make a difference in their communities.
Throughout the pandemic, the need to supply frontline healthcare workers with protective gear and other essential hospital supplies emerged as a major concern for communities across the country. In response, manufacturing conglomerate 3M ramped up its efforts to produce more than a billion N95 masks before the end of 2020.
The 120-year-old manufacturing company was able to double its production of N95 masks to 100 million per month by using “surge capacity” to activate idle machinery and tap many of its plant employees for overtime work. Because of these maneuvers, 3M was able to ship more than a half million N95 masks to New York and Seattle, two of the communities hit hardest by COVID-19 initially.
“I want people to know we are doing all we can to meet the demands of this extraordinary time and get supplies from our plants to where they’re most needed as quickly as possible,” wrote 3M CEO, Mike Roman in a note on LinkedIn.
According to Roman, increasing global capacity has become a major focus for the manufacturing giant as a result of the COVID-19 pandemic.
“We are working with the U.S. and other governments, investigating alternate manufacturing scenarios, and exploring coalitions with other companies to increase capacity further,” he wrote.
Accelerating global capacity could include investments in the Class A distribution center that it leases from Modiv. Located on the western edge of the Chicago metropolitan area in DeKalb, Ill., the facility plays a key role in 3M’s export operations to North America, Latin America, Europe, Africa and the Middle East.
“3M is working proactively and is well-prepared to protect our employees, maintain business continuity and sustain our operations. Our crisis response team — which I am a member of — is overseeing all aspects of our strategies, and we are collaborating with our business partners across industries to prepare for any and all scenarios that may unfold,” wrote Roman.
The Minnesota-based manufacturer was just one of the tenants in Modiv’s portfolio to make headlines for its COVID-19 response efforts, with global warehouse club chain, Costco Wholesale, and Earthbound Farm garnering similar attention.
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The views and opinions expressed in this commentary reflect Modiv Inc.’s (together with its affiliates, “Modiv”) beliefs and observations in commercial real estate as of the date of publication from sources believed by Modiv to be reliable and are subject to change. Modiv undertakes no responsibility to advise you of any changes in the views expressed herein. No representations are made as to the accuracy of such observations and assumptions and there can be no assurances that actual events will not differ materially from those assumed. The forward-looking statements in this paper are based on Modiv’s current expectations, estimates, forecasts and projections, and are not guarantees of future performance. Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. These materials are provided for informational purposes only, and under no circumstances may any information contained herein be construed as investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any Modiv program or offering. Alternative investments, such as investments in real estate, can be highly illiquid, are speculative, may not be suitable for all investors, and there is no guarantee that distributions will be paid.