Investors Clamor for Oil/Gas Net Lease Assets
There is strong investor demand for oil- and gas-related net lease assets in Oklahoma by coastal investors and in larger markets where investors are continuing to diversify holdings to chase additional yield.
OKLAHOMA CITY—Net lease, an oil and gas tenant, a strong operating history and a 1031 exchange-motivated buyer equal a winning combination for a 133,630-square-foot single-tenant warehouse located at 4500 Southeast 59th St. It sold for an undisclosed purchase price to Mohegan Capital LLC, a Denver-based private equity group.
The property was sold by an affiliate of CIM Income NAV Inc., which was represented by Stan Johnson Company’s Zach Harris, Ryan Butler and Jeff Hughes.
“We have been seeing strong investor demand for net lease assets in Oklahoma and the middle of the country in general,” Harris, a director in Stan Johnson Company’s Tulsa office, tells GlobeSt.com. “Investors based on each coast and in larger markets are continuing to diversify their holdings in an effort to chase additional yield without giving up tenant credit quality and strong lease fundamentals.”
This demand is not only for net lease but also oil/gas assets, says Harris.
“This transaction showcases the continued demand for oil- and gas-related net lease assets, especially in a market like Oklahoma City,” said Harris.
It was fully leased to QES Pressure Control at the time of the sale.
“The lease featured a publicly traded tenant with a long operating history at the site, annual rental increases and an absolute triple net expense structure,” added Harris. “The 1031 exchange-motivated buyer was attracted to these aspects of the opportunity.”
Substantial changes in the vacancy rate are not expected in either direction this year, according to an industrial report by Price Edwards & Company. New construction in Oklahoma City will likely be mostly pre-leased, resulting in limited effects on occupancy rates. Competition for tenants in certain product types such as flex space will motivate owners to offer incentives, but rate decreases are not anticipated.
Overall, new construction is expected to remain at current levels focused primarily on oilfield service companies or owner-occupied space. The recently announced Amazon fulfillment center may facilitate some new construction of bulk warehouse space for distribution firms supporting this location, says the report.