An 80,000 square foot industrial building located at 6419 South 228th Street in Kent, sold last week for $12.5 million, or $155 per square foot, at a 4.93 cap rate. The seller, who is also a tenant in the building, is NASDAQ-traded Patterson Companies, one of the largest distributors of veterinary and dental supplies. The buyer was Hill Investment Company, the Mercer Island-based owner and operator of more than 40 properties comprising 3,400,000 square feet of industrial, retail and office space across the region. The property was sold by Tony Miltenberger, senior vice president and partner with Kidder Mathews. He works out of the company's Seattle office.
The property features a roughly 7,500 office component in the building. The property has 25 feet of clearance, two grade level doors, and it is insulated and temperature controlled. According to Miltenberger, Patterson purchased the building in 2008 for nearly $6.1 million. The current sale was predicated on Patterson remaining in the property for the next five years. The company fully occupies the building and its five-year lease will commences on September 1, 2017. Patterson has agreed to pay $616,443 per year to lease the property with 3 percent annual rent escalations. The breakdown between the shell and office portions came to $0.58 per square foot and $0.85 per square foot, respectively.
"Buyer's and seller's goals aligned perfectly, as both viewed this transaction as a long term partnership," said Miltenberger. The property saw a lot of interest from a number of buyers looking to make an investment in North Kent Valley. "This property fit the bill where you would get a lot of interest, and because of its size, the property was able to get in front of a lot of different buyers," he said.
According to the second quarter Seattle Industrial market report by Kidder Mathews, the region's industrial market saw mostly positive results mid-way through the year. Net absorption in the second quarter was positive at 1,186,744 square feet (nearly 3.2 million square feet cumulative for the first six months), buoyed by both Pierce and Thurston Counties, which helped offset negative net absorption in Seattle, South King and East King County markets, stated the report. Vacancy inched up to 3.16 percent from 3.02 percent, while construction activity remains strong with nearly 1.7 million square feet in deliveries for the quarter and nearly 5.8 million square feet under construction.
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