FSX Industrial 34, DST

Offering 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.

Forecasted Cash Flow

Projected annual cash-on-cash distributions with the corresponding tax-equivalent yield over the hold, based on the sponsor’s underwriting assumptions.

Illustrative projections only — targeted distributions are not guaranteed and actual results will vary. Tax-equivalent yield assumes depreciation shelter of distributed income.

Analyst Notes

FSX Industrial 34 is a moderately leveraged, core single-tenant industrial net-lease DST whose return is leverage-amplified contractual income: a fixed (swapped) 5.495% loan at 48.63% loan-to-capitalization against the in-place yield lifts cash-on-cash from 5.05% to 5.25% (roughly 5.11% average) over a 7-year hold, with a healthy 2.06x Year 1 coverage. It is closest in profile to the ledger's leveraged net-lease holdings (BREX Net Lease Industrial, ExchangeRight Portfolio 75) rather than the debt-free all-cash series, but is distinguished by being the only entry whose loan amortizes, accreting modest principal equity into the exit. The investment case rests on two mission-critical distribution assets with long WALT and a barbell of one investment-grade public credit (Eaton) and one strong-but-unrated private credit (Carhartt), set against a favorable industrial-demand backdrop and, for Eaton, a premier Spartanburg submarket. The dominant risk-adjusted considerations are the two-asset/two-tenant concentration skewed toward unrated Carhartt in a tertiary market, the older sub-modern Eaton box, two near-simultaneous lease expirations a few years beyond the exit, and a 7-year balloon whose amortization step-up compresses coverage and whose swap imposes breakage cost on early sale. Underwriting feasibility is high on in-place contractual income; the credible variance lies in the exit pricing, refinancing conditions at maturity, re-leasing of two specialized assets at rollover, and the form and timing of the optional Section 721 conversion, which investors may decline in favor of cash. The 15.32% load and below-inflation escalators are the principal economic drags on net return.

Financing

Financing terms for this offering are summarized below.

Benchmark Comparison

Benchmark reflects the average of comparable Industrial offerings. Differences are relative to the benchmark.

Offering Documents

Offering Documents Available By Request

About the Sponsor

Four Springs Capital

Four Springs Capital reaches the 1031 market through Four Springs TEN31 Xchange, sponsoring net-lease DSTs concentrated in single-tenant industrial and medical properties under long-term leases to credit tenants such as Ford, Eaton and Carhartt. A deliberate focus on the $5 million-to-$200 million deal range keeps it below the institutional bid and above the retail scrum, a niche it has worked across more than 1,000 completed exchanges and over $1 billion in equity raised. As a subsidiary of Four Springs Capital Trust, it offers an UPREIT roll-up into the REIT, combining credit-tenant durability with a defined exit.