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January 24, 2019
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Private Investor Buys Single-Tenant Industrial Asset in Texas


A private investor from San Francisco paid $5.63 mil for a 96k sf ($59/sf) industrial property in San Antonio, TX. The buyer had sold a Walgreens-occupied property in Texas to trade into this well-located industrial building in a densely populated market, which is expected to provide a better yield, with a growing income stream and long-term returns.

Located at 1949 Hormel Dr, 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.

Scott DeYoung of Faris Lee Investments represented the buyer in the deal. The seller, an institutional owner, was represented by Preserve West Capital. The transaction closed at a 6.9 percent cap rate.

According to Faris Lee, 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.

“While Walgreens is a credit tenant, the income was projected for flat future returns,” noted DeYoung. “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.”

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