NNN Lease Asset Trades at $500PSF

LOS ANGELES—A single-tenant triple-net leased asset has traded hands at $500 per square foot in a whirlwind of a transaction. Stock Building Supply, which has been a tenant at the property for 20 years, had a right of first refusal to purchase the asset. When the original owner decided to dispose of the building, Stock Building Supply exercised its option and purchased the building for $14.75 million, according to industry sources unrelated to the deal. The company then turned around and sold the property for $15.7 million in a fully marketed transaction that generated 11 offers from investors. As a result, the tenant earned nearly $1 million in profit in two months. 

“The tenant called us and asked if they should exercise the right of first refusal and secure their future in the building, but the only way they would do that is if they could capitalize on the market and get back their capital investment or better,” Chris Sands, founder of Sands Investment Group, tells GlobeSt.com. Sands represented the seller in both transactions. He was able to bring the property to market at a higher price point because of a lease-back he helped the tenant structure that was well above the market-rate rents in the area, which average between $18 to $20 per square foot. He wouldn’t disclose the rental rate, but told us that it was significantly higher than market rate. “We sat down and discussed what the leasing structure needed to look like to be enticing to the market, and settled on a 15-year term with a 1.5% annual increase,” he says.