Home Commercial DCT Buys Industrial Property in Algona Through Sale/Leaseback Arrangement

DCT Buys Industrial Property in Algona Through Sale/Leaseback Arrangement

By Jon Peterson

Denver-based DCT Industrial Trust has paid $5 million or $100 per square foot to acquire the 50,212 square foot warehouse/distribution property located at 512 Boundary Blvd. in Algona, according to sources that track the sale of industrial properties in the greater Seattle metropolitan area.

The Seattle office of DCT declined to comment on the purchase price of the property.

“We acquired this property in a sale/leaseback with the tenant where it will remain in the property for the next five years. It’s our opinion that this kind of deal structure can be an effective way to do business in some circumstances. This property was acquired in an off-market transaction,” says Patrick Gemma, a senior vice president in the Seattle market for DCT.

The tenant in the deal was McKillican American. It was represented in the transaction by the Seattle office of Colliers International. The two brokers representing the seller were Bill Condon and Matt McGregor, both executive vice presidents.

The property is projected to produce a 5.2 percent one-year cash return, as DCT stated in its 2015 third quarter results report. The property was built in 1988. The rental rates for the tenant in the property are $0.40 to $0.75 triple-net, according to sources that follow rental rates for industrial properties in the Seattle area.

The Algona/Auburn industrial market is one that is very attractive for investors. “We see this market as one that is very tight. There is no land left to build on in the sub-market. This is one reason why the vacancy in the area is 2 percent on 23 million square feet of space,” said Gemma.

The fact that there hasn’t been any new development of industrial properties in the sub-market over the past 10 years has had a positive effect on rents. The projection is that rents will move up by three to five percent over the next 12 months.

Seattle continues to be a market where DCT would like to grow its portfolio in the future. Through September of this year, the publicly-traded REIT owns 25 properties totaling 2.6 million square feet. This portfolio has a current occupancy of 96.5 percent.

Map courtesy of Google