CORONA DEL MAR, CALIF. – Hanley Investment Group, a nationally-recognized boutique real estate brokerage and advisory firm specializing in retail property sales, has completed the $15.2 million sale of a newly-built 45,000-square-foot, single-tenant, fee simple retail investment occupied by LA Fitness in Riverside, California.
Senior Vice President Pat Kent and Executive Vice President Bill Asher of Hanley Investment Group represented the seller, GRAE La Sierra, LLC of Los Angeles, Calif, a subsidiary of Seagrove LA, a commercial real estate development company headed by Rick Edwards, which is developing 6-8 new projects annually in Los Angeles, Orange and Riverside counties. The buyer, which was represented by George Ragheb of Entrance Homes, Inc. of Irvine, California, was a private investor from Lakewood, California.
The property is located at 10988 Magnolia Avenue in Riverside, California, near the intersection of La Sierra Avenue and Magnolia Avenue. Built in 2015 on 3.38 acres, LA Fitness featured a new 20-year primary lease term, with six option periods. LA Fitness is part of a larger overall shopping center, La Sierra Plaza, which includes Walgreens, El Torito, Farrell’s Ice Cream Parlour Restaurant, Jiffy Lube, Panda Express, Red Lobster and the County of Riverside.
According to Kent, “The sale of single-tenant health clubs have become a much more viable retail investment alternative in today’s market. From private to institutional investors, buyers are seeing the value and security of the income stream for a single-tenant health club, especially those leased to LA Fitness, one of the most successful private retailers in the United States and the #1 health club in the nation.”
“Historically investors have proceeded cautiously when evaluating a health club due to their special purpose build-out and the potential costs they might incur if the health club ever vacated in the future,” said Kent. “Values have changed dramatically in the last 24 months as the average cap rates for single-tenant health clubs in California have compressed approximately 100-150 basis points, one of the most significant cap rate compressions in the single-tenant retail sector.”
Kent attributes the historic compression in this niche not only to the overall market conditions, but simply the continued progression of society wanting to live a healthier lifestyle fostered by the ability to exercise at quality health clubs near their work or homes. “Health clubs are no longer a fad. Health clubs such as LA Fitness, 24 Hour, Planet, Crunch and Fitness 19 are here to stay and are expanding across the country in different formats,” says Kent.
Asher notes, “It was evident during our marketing process that LA Fitness identified a void when the company selected this particular area of Riverside as well as the strategic location, which is convenient to Interstate 91 (140,000 cars per day), next door to Kaiser Permanente Riverside Medical Center (40-acre campus), and minutes from the Galleria at Tyler (1.2 million square foot regional mall). We were able to procure a buyer we had transacted with in the past that had a firm understanding of these attributes and the strength of LA Fitness as a tenant, resulting in a secure long-term stable acquisition.”
About Hanley Investment Group
Hanley Investment Group Real Estate Advisors is a retail investment advisory firm with a $5 billion transaction track record nationwide, who works closely with individual investors, lending institutions, developers, and institutional property owners in every facet of the transaction to ensure that the highest value is achieved. For more information, visit www.hanleyinvestment.com.