Industrial And Retail Investment: Investors Buy Into KC

Industrial 

Like in years past, the industrial sector is always Kansas City’s most sought-after category for both local and institutional investors. Kansas City’s industrial market is very tightly held by numerous long-time local real estate developers, but there are several institutions that have made inroads into Kansas City over the last five years through acquisitions and development. These institutions include Colony Realty Partners, Welsh Property Trust, Cobalt, INVESCO, Blackstone, USAA, and Sun Life Assurance.

Along with the increased single asset sales that occurred in 2011, a large 24-building, 1,080,380 square foot portfolio owned by RREEF, was brought to market at year-end 2011. But while a buyer was selected, the closing is not expected until early 2012. 

Welsh Property Trust continued to add to its Kansas City portfolio with the purchase of the 405,000 square foot Midpointe Corporate Centre in Edwardsville, Kansas for $21.5 million ($53.00 per square foot) at a 7.86% cap rate. 

Also, the Block Funds completed the purchase of 6106 NE Parretta Drive in Executive Park and then a long-term lease was completed with PrimeSource to provide a going-in cap rate of 8.35%. 

Colony Realty Partners remained active with the purchase of the 172,445 square foot Castle Metals building in Executive Park at a 9.35% cap rate from Quadrangle Development. See the KC Business Journal article.

Several significant owner/user transactions were completed, including the 412,699 square foot Ball Container building to UHAUL, the 245,000 square foot 1100 Blake to Glazer’s Wholesale Liquor, and the 97,053 square foot Olathe Millwork Building to Himoninsa Power Systems, Inc. 

Retail

The lack of new development activity carried over from 2010 into 2011. Landlords continued to protect occupancy and manage existing tenants as their top priority. Retailers slowed their growth plans, which is expected to continue into 2012. Retailers with strong histories and solid business plans were still active and took advantage of empty buildings vacated by less successful companies.

Town Center Plaza, located in Leawood, Kansas

The two largest sales in the Kansas City market were both part of national portfolio transactions and included the Oak Park Mall sale from CBL & Associates to TIAA-CREF and Town Center Plaza from DDR to Glimcher Realty Trust, apart of a strategic asset swap. Oak Park Mall traded for $185 per square foot ($290 million) and Town Center Plaza traded for $337 per square foot ($139 million). A cap rate was not reported in either sale but industry experts expected them in the low 6% range.

There were also several smaller notable transactions that occurred in 2011. Tuileries Plaza was purchased for $16.2 million in Kansas City by Briarcliff Realty in a distressed purchase from a consortium of banks. The property had low occupancy and was a value-add purchase. Shawnee Village was sold by Weingarten Realty Investments to Five Star Investors, a group led by RH Johnson, for $6,769,500 at a 10.98% cap rate.

Although the number of transactions were still small, there are a number of buyers in the marketplace actively looking to purchase quality grocery-anchored retail centers and other well-priced retail properties.

Contributing Author:

Grant Reves
Investment Sales
Block Real Estate Services
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