IRVINE, CA – Faris Lee Investments, the nation’s largest retail-specialized investment advisory firm, has completed the $9.6 million sale of a 50,000 square foot retail property that is occupied by LA Fitness (top left photo). Situated on 5.61 acres, the property is located at 220 North Sanderson Ave. in Hemet, California.
Shaun Riley (middle right photo), director with Faris Lee Investments, represented the buyer in the transaction, a private trust from Beverly Hills who was in a 1033 exchange.
The seller, Eden Group, LLC from Pleasanton, Calif., was represented by Marcus & Millichap.
The property sold at a 7.6 percent cap rate which, according to Costar, is the lowest cap rate obtained for a single tenant health club-occupied property in the United States since July 2008.
The key to the transaction for Faris Lee was sourcing an asset for the buyer who was originally seeking a drug store property such as a CVS or Walgreens which offered long-term, passive returns.
Faris Lee advised that other assets, such as a health club property could be acquired at a much better yield. Additionally, the financing market has improved and financing terms would be similar to that of a drug store.
“The buyer was yield-driven and was looking for a strong credit, single-tenant investment in Southern California,” said Riley. “After conducting a thorough search of the marketplace, we advised our client on the possibility of acquiring the Hemet LA Fitness as a strong option since the tenant had the financial strength the buyer required and had more than 12 years remaining on the lease term.
“The pricing, cap rate, and the opportunity to finance the property with new debt that could be obtained at a historically low interest rate, also appealed to the buyer.”
Riley added that ultimately, the buyer placed long-term financing on the property at 240 basis points lower than the cap rate, which provided the buyer with a 10 percent cash return going in, not to mention future rent increases.
The property is located just off Hemet’s busiest commercial intersection at Florida Ave. and Sanderson Ave. with combined traffic counts of more than 70,000 vehicles per day. Nearby retailers include Home Depot, Target, Staples, Ross, Lowes and others.
Contact: Darcie Giacchetto, 949.278.6224, Spaulding Thompson & Associates, For Faris Lee Investments
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