IRVINE, Calif., May 8, 2018 – In a strategic move to maximize long-term returns for its client, Faris Lee Investments has brokered the $5.63 million acquisition of an approximately 96,000-square-foot industrial property in San Antonio, TX. Faris Lee advised the client to sell its Walgreens-occupied property in Texas and trade into a well-located industrial building in a densely populated market, which would provide for a better yield, with a growing income stream and long-term returns.
Director Scott DeYoung of Faris Lee Investments represented the buyer, a private investor from San Francisco. The seller was an institutional owner that was represented by Preserve West Capital. The transaction closed at a 6.9 percent cap rate.
Located at 1949 Hormel Drive near downtown San Antonio, the building is situated on just over five acres within San Antonio’s primary industrial market and is fully occupied by a single tenant, Republic Services, Inc. It is near the 410 Loop and provides access to Interstate 35 and other major freeways.
While Faris Lee specializes in retail investment, the firm always takes a holistic approach in balancing the goals, objectives and risk tolerance of the investor, and aligning the real estate investment to correlate with the investment thesis – this includes incorporating other property options for its clients when focused on value creation and retail is not a viable option. In this case, changing market dynamics are creating a shift as industrial assets are experiencing higher demand as a result of increasing e-commerce operations. Year over year, San Antonio has had a shrinking industrial vacancy rate and demand outstripping supply, resulting in rising property values and rents.
“The client was looking for a long-term passive investment opportunity with promising rental growth,” said DeYoung. “Our Faris Lee team developed an investment plan that outlined why this industrial asset would be a strategic investment versus holding onto its Walgreens property. While Walgreens is a credit tenant, the income was projected for flat future returns. By trading into an asset in San Antonio’s tight industrial market, our client will have less risk and higher yield based on the intrinsic value of the real estate as industrial rental rates are projected to see higher increases over time compared to retail assets. The asset was purchased below replacement cost especially in a market with rising commodity prices and construction costs.”
DeYoung noted: “The investment thesis was straightforward; the “fundamentals” of the real estate would outperform a credit investment, and reduce the investment risk at the asset level.”
About Faris Lee Investments: Faris Lee Investments is a leading retail advisory and investment sales firm. The company’s high-level retail investment advisors and sophisticated financing experts develop forward-thinking strategies for all retail acquisitions and dispositions and guide clients through complex transactions. Cumulatively, Faris Lee’s leadership has been involved in more than $20 billion of transactions. Faris Lee's senior advisors are skilled in disposition and acquisition strategies, asset positioning and valuation, marketing, debt and equity structuring, strategic workout and REO solutions and execution. For more information, visit www.farislee.com.
Faris Lee is also strategic partner with X Team Retail Advisors, an integrated platform of retail real estate specialists that offers coverage in 40 major markets across the United States and Canada encompassing more than 265 professionals. X Team provides specialty expertise in tenant, property and developer/landlord representation, property dispositions and retail investments.