$51.25M Owner-User Deal Where the Investment Math Simply Does Not Close

At $340/SF, I would have a hard time making this deal work as a traditional investment. CoStar puts the market closer to $305/SF, and at the indicated $19.61/SF market rent, the $51.25 million purchase price is roughly 17.4x annual rent before expenses.

But Travelers Club Luggage was not buying a yield. 

They were buying their own facility.

This is a 2022 Class A industrial building with 32-foot clear, 16 dock doors, a 135-foot truck court and 6.53 acres. 

For an operating company that needs this exact facility, control of the real estate can be worth more than what an investor can justify from the rent roll.  

The bigger takeaway may be on the seller side. 

Ares owned this for only 17 months and found the buyer who could pay the most for it: the user. 

That is often where the highest industrial price comes from not another landlord underwriting a cap rate, but a business underwriting what the building is worth to its operations.

This is why its hard for investors to own Industrial.  Owner Users are willing to pay a number that doesn't make sense to an Operator.  

I would not use this sale as an investment comp. I would absolutely use it as an owner-user comp.

I research these transactions to sharpen my own investment strategy and share what I find so Los Angeles owners, brokers and investors can debate the market with better information.

Know one other LA owner who'd want this deal? Forward this — reply with their email and I'll add them.

Property and transaction data: CoStar Research.