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June 19, 2024
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Riverside LA Fitness Trades in $15 Mil Deal


A newly-built, 45k sf, single-tenant, fee simple retail building occupied by LA Fitness in Riverside was purchased by a private investor for $15.2 mil, or $337/sf. Built in 2015, the propertyis situated on 3.38 acres at 10988 Magnolia Ave, north of the 91 Fwy and east of La Sierra Ave.

The LA Fitness features a new 20-year, primary lease term, with six option periods. LA Fitness is part of a larger overall shopping center, La Sierra Plaza, which includes Walgreens, El Torito, Farrell’s Ice Cream Parlour Restaurant, Jiffy Lube, Panda Express, Red Lobster and the County of Riverside.

Senior Vice President Pat Kent and Executive Vice President Bill Asher of Hanley Investment Group represented the seller, GRAE La Sierra LLC of Los Angeles, a subsidiary of Seagrove LA, a commercial real estate development company headed by Rick Edwards. The company is developing six to eight new projects annually in Los Angeles, Orange and Riverside counties. The buyer was repped by George Ragheb of Entrance Homes Inc of Irvine.

According to Kent, “The sale of single-tenant health clubs have become a much more viable retail investment alternative in today’s market. From private to institutional investors, buyers are seeing the value and security of the income stream for a single-tenant health club, especially those leased to LA Fitness, one of the most successful private retailers in the United States and the #1 health club in the nation.”

“Historically investors have proceeded cautiously when evaluating a health club due to their special purpose build-out and the potential costs they might incur if the health club ever vacated in the future,” said Kent. “Values have changed dramatically in the last 24 months as the average cap rates for single-tenant health clubs in California have compressed approximately 100-150 basis points, one of the most significant cap rate compressions in the single-tenant retail sector.”

Kent attributes the historic compression in this niche not only to the overall market conditions, but simply the continued progression of society wanting to live a healthier lifestyle fostered by the ability to exercise at quality health clubs near their work or homes. “Health clubs are no longer a fad. Health clubs such as LA Fitness, 24 Hour, Planet, Crunch and Fitness 19 are here to stay and are expanding across the country in different formats,” says Kent.

Asher notes, “It was evident during our marketing process that LA Fitness identified a void when the company selected this particular area of Riverside as well as the strategic location, which is convenient to Interstate 91 (140,000 cars per day), next door to Kaiser Permanente Riverside Medical Center (40-acre campus), and minutes from the Galleria at Tyler (1.2 million square foot regional mall). We were able to procure a buyer we had transacted with in the past that had a firm understanding of these attributes and the strength of LA Fitness as a tenant, resulting in a secure long-term stable acquisition.”

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