By Meghan Hall
Single-tenant retail transactions continue to be the choice of investors looking to invest in the Puget Sound market. In a deal that closed on January 8th, San Diego, Calif.-based Realty Income purchased a Tacoma Home Depot for $38,902,775. The seller, according to public documents, is Oak Brook, Ill.-based The Inland Real Estate Group of Companies.
The property is located at 4602 Center St., just south of downtown Tacoma and Tacoma Community College. The lot itself totals more than 11 acres and is developed with a building constructed in 2004, which totals 117,064 square feet.
The Inland Group of companies originally acquired the property in 2015. The firm is one of the nation’s largest commercial real estate and finance groups, with $48 billion in acquisitions to date and over $80 billion in transactions to date. The Inland Group have owned and managed hundreds of millions of square feet of commercial property types.
Realty Income, the property’s new owner, targets single-tenant, net-leased commercial properties, focusing its energy leased to tenants with reliable and sustainable cash flow. Lease terms exceeding 10 years are preferred, and income from leases are used to support dividend payments to shareholders. According to its website, Realty Income had $3.72 billion in acquisition volume in 2019 and $17.3 billion in property level acquisition volume since 2010. Across its entire portfolio, occupancy rates sat at 98.6 percent across nearly 6,600 properties at the end of the third quarter of 2020.
According to a report released by Kidder Mathews, cap rates for single-tenant properties not impacted by COVID-19, such as the Tacoma Home Depot, remain low thanks to high investor demand. Cap rates for daily-needs anchored centers are up seven basis points, while cap rates increased 75 basis points for malls and 41 basis points for power centers. Additionally, notes Kidder Mathews, of the 36 retail sales that were completed during the third quarter of 2020, 30 were for single-tenant properties, most of which had eight years or more or remaining lease term.