Case Study: 10461-10463 Austin Dr

Challenge

10461-10463 Austin Drive is an incubator industrial project that was purchased off-market at a well-below-market price with a value-add through leasing and management strategy. The property consists of two buildings totaling 22,089 square feet. The previous owner’s biotech company was occupying one entire building, totaling 40% of the property. The remainder of the property consisted of incubator industrial tenants, which, at the time, were all on gross, under-market lease rates with short-term lease expirations.

 

Strategy

The agents successfully negotiated a sale-leaseback with the previous owner, securing a long-term anchor tenant on a NNN lease with above-market fixed rent increases. During the escrow period, the agents also renewed over 60% of the property’s month-to-month leases at market rates. During this time, they began a two-year, gross-to-net lease structure conversion that would ultimately increase effective rents by over 50% on the property and result in a more desirable structure at the time of exit.

 

Results

As of Q3 2023, the property currently is stabilized above a 7.0% cap rate and is being prepared to be exited to an investment buyer looking for a stabilized multi-tenant park. Over $250,000 in physical improvements have also been completed, and 95% of the property has been converted to NNN at market rents.