A Swedish investment group has purchased 1.38 million square feet in two large Napa Valley warehouses. The largest tenant is an Ikea e-commerce hub — at least for the next three months.
Affiliates of EQT AB’s real estate arm, EQT Exeter, on Nov. 19 purchased the 646,000-square-foot 1 Middleton Way building, occupied for the past seven years by the furniture retailer, and 702,000-square-foot 400 Boone Drive in American Canyon from an affiliate of DWS Group’s RREEF Property Trust. They collectively sit on 89.2 acres of the 218-acre Napa Logistics Park industrial development.
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The recorded value paid was $202 million — $105.15 million by Exeter 400 Boone LLC and $96.85 million by Exeter 1 Middleton LLC, according to county records. That equates to almost $150 per square foot for each building.
Ikea leased all of 1 Middleton in September 2017 and occupied the building the following year as part of a plan to ramp up e-commerce sales alongside its big-box furniture stores.
Early this year, the retailer filed a WARN Act notice with the state that it would be laying off 147 workers there and closing the facility by February 2025, the Business Journal reported. That’s when the lease expires.
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The 400 Boone building was completed in 2021. Napa-based Biagi Bros. Warehousing & Logistics leased almost half (337,000 square feet) for wine-related storage. Fairfield-based Meyer Cookware had leased the other half, but earlier this year vacated that space.
Requests for comment from EQT Exeter were not answered.
Stockholm-based EQT merged with Philadelphia-based Exeter Property Group in a 2021 deal valued at $1.87 billion, according to trade publication Commercial Property Executive.
This year, Exeter is expected to complete $6.8 billion in property acquisitions this year, up from $2.2 billion last year, investment information service Green Street reported.
The value per square foot in the American Canyon deals hadn’t changed much in six years. RREEF’s RAR2—Napa Logistics Park LLC had purchased the development in September 2018 for $90.45 million from an affiliate of developers Divco West, Orchard Partners and DWS. That price works out to about $140 for each square foot of the 1 Middleton building, which was completed in 2016 and was the first warehouse constructed.
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While the purchase of two large warehouses with only about one-quarter leased long term may seem like a risky move, it reflects the realities of industrial real estate in the North Bay specifically and elsewhere, according to Laura Duffy out of JLL’s San Rafael office.
“People would buy buildings with lengthy leases in place, if they existed,” Duffy said, noting that she has been scouting for potential properties for an investor with $10 million to spend. “Potential sellers are not putting buildings out to market right now because they know buyers will hammer them (on price). We have not seen many industrial sales at all because there has not been enough leasing.”
JLL’s fall industrial property demand study found that requirements for space are down 1.8% across types of use nationwide, but there has been an uptick in certain markets for third-party logistics and for manufacturing space.
Completing the Napa Logistics Park buildout have been Amazon’s 201,000-square-foot delivery hub at 200 Boone and Pacific Gas & Electric Co.’s nearly 363,000-square-foot regional service center at 500 Boone.
Representing the sellers of the American Canyon buildings were JLL agents Ryan Sitov, Melinda Marino, Glen Dowling, Matt Bracco and Chris Neeb.
Jeff Quackenbush covers wine, construction and real estate. Reach him at [email protected] or 707-521-4256.
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