Business Case Studies & Business Publications

Hamburg Logistics

Smith, Anthony W.,...

Case

Hamburg Logistics

Smith, Anthony W.; Hudson, Will

F-2138 | Published March 17, 2026 | 19 Pages Case

Collection: Darden School of Business

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In early 2022, Reid Townsend (MBA ’00), founding principal of MRP Industrial (MRPI), prepared to close on the 150-acre Hamburg Logistics Center site in Pennsylvania’s Lehigh Valley. This followed a multiyear rezoning and entitlement process that began with a 2019 purchase and sale agreement. At the same time, MRPI negotiated a joint venture with Whitestone Capital to finance and build a 1,000,000-square-foot Class A distribution facility, with speculative development set to begin in June 2022. The pro forma projected $11.00 per square foot triple net rent, a 6.75% yield on cost, and a 5.25% stabilized capitalization rate. This strategy involved significant risks, including uncertain lease-up timing, exposure to floating-rate construction debt, and exit valuation. Some risks were addressed through an incentive compensation structure known as a “waterfall,” designed to reward Townsend’s strategy. However, this approach was challenged when MRPI received a confidential letter of intent from Nilemart, an AA-rated national e-commerce and retail tenant, proposing an open-book build-to-suit lease. Nilemart’s offer included a 10-year lease, up to $50 million in tenant-funded improvements and automation, and immediate stabilization upon delivery. The proposal, however, specified a 6.00% rent constant, or about $9.60 per square foot, which reduced the development spread and limited the potential upside compared to the speculative scenario. The case asks students to determine whether MRPI should continue with speculative development under the joint venture terms or shift to a build-to-suit structure that significantly reduces execution and capital markets risk. Students must evaluate industrial development underwriting, exposure to lease-up and financing risks, sensitivity to rent and capitalization rates, and how the Whitestone waterfall and buyout mechanisms align incentives in each scenario.