By Jon Peterson
Newport Beach, Calif.-based Bixby Land Company has produced a 5.6 percent cap rate on the company’s first ever industrial transaction in the Seattle market. “This return is based on the two building’s current net operating income,” says Mike Severson, senior vice president of investments for Bixby Land.
The two investments represent the first of several that the company is planning in the Seattle market. “We are very glad to find our first deals in this new market for us. Our plan going forward is to invest another $30 million or $40 million worth of additional deals in the marketplace between now and the end of 2016. We have been looking at the Seattle market for over a year as a possible place to expand our investment strategy into,” said Severson.
“We like the makeup of the Seattle market as it’s a diverse area being driven by the tech growth and as an overall market has an office vacancy of around 10 percent”
The buyer acquired two core industrial properties in Seattle for $12.4 million. The assets were acquired in an all-cash transaction, although the investor is open to putting some debt on the assets in the future. The seller of the property was Panattoni Development Company, and both the buyer and seller were represented by the CBRE office in Seattle. The listing agents were Brett Hartzell and Taylor Odegard.
One of the properties is the 63,768 square foot property located at 14513 32nd Street East in Sumner. The property is 100 percent leased to OMADA International, a supplier to the aerospace industry. The lease with this tenant runs for 10 years. The other property is located in Auburn at 1417 West Valley Highway North. The 34,435 square foot building has Tellwork Communication as its only tenant for at least another three years.
Bixby Land likes the demographics of the Seattle industrial market. “It’s currently a very strong market with much more demand than there is supply to support this. There are land restrictions, which make it very difficult to add new supply. This makes the existing properties very valuable to own,” said Severson. The Sumner market has an industrial base of 14.4 million square feet and has a current vacancy of 7.5 percent. Auburn is even a bigger industrial market totaling 26.2 million square feet. Its vacancy is currently in the range of 3 percent.
Bixby Land has two distinctive investment strategies for the Seattle market. One is to buy core industrial assets like it has done in Sumner and Auburn. It would also like to buy existing office buildings that have a value-add investment play. “Our plan with office buildings is to buy an existing property, renovate it, lease up the empty space and sell the asset over a three-year time period. We are hopeful of finding a first office deal in Seattle sometime in the near future,” said Severson.
Bixby Land will be looking for its office building purchases in either downtown or South Lake Union area of Seattle. “We like the makeup of the Seattle market as it’s a diverse area being driven by the tech growth and as an overall market has an office vacancy of around 10 percent,” said Severson.