PHOENIX—Faris Lee Investments has completed the $12 million sale of a 45,000-square-foot, single tenant, NNN-leased retail property occupied by LA Fitness in Goodyear.
Chris Tramontano, Patrick Luther and Matthew Mousavi of Faris Lee Investments represented the seller, DTD – Devco 9, LLC, out of Scottsdale. The buyer, a private family trust from Los Angeles, was represented by Republic Commercial Real Estate. The buyer was in a 1031 exchange up-leg with a property out of California and placed a small loan on the asset to cover debt as part of its 1031 exchange. The closing cap rate was 6.8 percent.
LA Fitness is on a long-term 15-year lease with approximately 11 years remaining on its initial term. Built in 2009, the property is located at 1382 South Cotton Lane at the signalized hard corner intersection of South Cotton Lane and West Yuma Road and near Interstate 10. The asset offers unobstructed street visibility with monument signage.
“Faris Lee highlighted the strong credit tenant with a corporate lease guarantee, and marketed primarily to private, out-of-state buyers with a particular focus on California investors,” says Mousavi. “Our marketing campaign generated more than 10 offers, from institutional and private investors. In this situation the private market was more aggressive than the institutional buyer pool by over 50 basis points.”
Tramontano adds, “Faris Lee highlighted the high growth trade area that the property is located within, and overcame the objections of vacant outparcels and undeveloped land surrounding the property by focusing on tenancy and the future growth potential of the rest of the center and trade area.”
The LA Fitness property is located in a thriving area retail corridor. It is near Canyon Trails Town Center, a 435,000-square-foot power center with tenants Target, World Market, PetSmart, Fry's, Dollar Tree, and Famous Footwear. It is the only fitness center within a three-mile radius which has a population of more than 34,000 residents.
This Phoenix-area sale marks the third transaction Faris Lee has completed over the past three months to California-based buyers totaling nearly $48 million. These sales provide testimony to the trend that California capital is seeking opportunities in growing markets in nearby states such as Arizona.
The firm announced the $22 million sale of Watson Marketplace, a fully leased, 90,000-square-foot retail center located in Buckeye, to a San Diego buyer in September. Last month, Faris Lee completed the $13.7 million sale of a multi-tenant retail property fully occupied by LA Fitness, OfficeMax, Carter's, and Styles for Less in Peoria.
“The California market continues to be highly competitive. Cap rates are already compressed to historical lows, and there are many who believe they have room to compress further,” says Richard Chichester, president and CEO of Faris Lee Investments. “Consequently, California investors seeking yield are increasingly attracted to out-of-state markets. Arizona is an area of particular interest for California investors because of its proximity and improving economy. In the past year we've placed better than 55% of our California capital in out-of-state investments.”
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