Mayfield Properties has closed on its first industrial property purchase in the Alamo City. The deal marks one of the bigger buys in the industrial real estate market over the past few years. It also involves a player with a plan to establish a healthy foothold in the city’s industrial sector.
Mayfield, based in Dallas, purchased the Lanark Distribution Warehouse, a building spanning 235,420 square feet at 610 Lanark in Northeast San Antonio. Mayfield will own the building under the name 610 Lanark Partners LP.
The acquisition is the first for Mayfield in a city that has been on the firm’s radar screen for some time, says Jim Jones, a co-founder of Mayfield.
While he declined to divulge the purchase price, Jones does say that Mayfield is investing approximately $1 million to redevelop the property.
The building is currently valued at approximately $4.4 million, according to the latest information from the Bexar Appraisal District.
To date, the Alamo City industrial real estate market has been dominated by one major player: ProLogis. All told, the Denver-based real estate investment trust (REIT) owns more than 6 million square feet of multitenant industrial space in the greater San Antonio area — out of the 30.7 million square feet that makes up the local market.
As the biggest owner, ProLogis also has been the price-setter for the local industrial market, observes John Greg Turcotte, senior vice president and partner in NAI REOC San Antonio. Turcotte is marketing Lanark on behalf of Mayfield Properties.
ProLogis’ niche has been the larger industrial users — those needing 50,000 square feet or more.
Mayfield, however, is coming into San Antonio with a different tactic. The firm is taking what was a large, open warehouse and breaking it up into smaller spaces to make it attractive to the smaller tenants — those needing 15,000 to 20,000 square feet or less.
Given the age of Lanark — it was built in 1979 — Mayfield will also be able to offer competitive rents, without having to compete against the deeper discounts of a global player like ProLogis, Jones and Turcotte add. “By splitting it up, we can enhance the return to our investors — by making more leases to the smaller tenants,” says Jones.
Mayfield’s leasing strategy appears to be working. The firm recently inked a lease with Birmingham-based Ram Tool and Supply Co. for 17,820 square feet in the Lanark facility, says Turcotte, who adds that several other deals are in the works.
Mayfield’s purchase also speaks to a revival in investment activity within the local industrial sector.
Prior to Mayfield’s acquisition of Lanark, the biggest investment news was the $1.02 billion deal between ProLogis and New York-based Blackstone Real Estate Advisors. That deal made Blackstone the new owner of 180 industrial properties in North America — including eight buildings, totalling roughly 728,000 square feet of space, in San Antonio.
But while these larger players go after the bigger users, Mayfield is courting what remains the prime market for the San Antonio area.
“They’re repositioning Lanark to go after the local and regional guys,” Turcotte says.
Mayfield’s Jones is no stranger to the local industrial scene. Prior to co-founding Mayfield, Jones was responsible for buying industrial properties in San Antonio for Shreveport, La.-based Sealy & Co.
“We like the dynamics of the San Antonio market,” says Jones. “We like the mid- to smaller-tenant type market.”
The Lanark distribution center, he says, was a “good opportunity to acquire a sizeable (piece) of Class B warehouse in San Antonio.”
The local industrial market — like the city’s other real estate sectors — has struggled in the tough economic times.
The market ended the first quarter of 2011 in the red — posting negative absorption of more than 161,000 square feet, according to the NAI REOC San Antonio report. Absorption is a measure of the net space leased or returned (negative absorption) to the market over a given period of time.
A year earlier, the industrial market was sitting firmly in the black — having absorbed some 280,000 square feet of space.
Not surprisingly, vacancy rates were also up on a year-over-year basis — going from 13 percent as of first-quarter 2010 to 13.8 percent at the end of the first quarter this year.
Despite these lackluster numbers, Turcotte says that activity is brewing in the industrial market.
The trick now is getting negotiations across the finish line as done deals.
“Things are turning around,” says Turcotte.
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