Stream Realty Partners bought 400,000 square feet of industrial space in San Antonio, nearly 170,000 square feet of which is refrigerated and freezer space.
After watching the industrial market heat up over the past few years, the firm was looking to cool things down. Well, kind of.
The commercial real estate firm bought property at 5711 FM 78 — a Class A food-grade distribution facility that was a former warehouse for Houston-based Sysco Corp. (NYSE: SYY) before it moved to New Braunfels. The site was put up for sale a couple of years ago, but even at $15 million — a bargain considering similar facilities cost about $40 million alone to build — the building had been left vacant.
To speed up the process, Sysco steadily dropped the price until it caught Stream’s attention. The deal, which also includes warehouse and truck maintenance facilities at 5235 and 5246 Tacco Drive, respectively, became one the firm thought was simply too good to pass up.
“Food consumption is a robust business, so to have this building with the unique infrastructure, we found it to be very interesting,” Jason Schnittger, Stream’s managing director, said. “We have to put some money back into it for upgrades, so this was a risky move for us because it is so unique. If you don’t need cold space and you’re not a huge user, we can’t accommodate you.”
The acquisition points to a more significant trend in the market of a tightening industrial space. Schnittger said the economy in Texas is “doing very well,” and as a result, the industrial market has seen a significant amount of absorption. Vacancy rates have hit all-time lows at 5 percent, so this was an opening that Stream — which already has 2 million square feet of industrial space in its San Antonio portfolio — couldn’t resist.
The firm will be putting in $2 million in renovations for all three sites, including paint, concrete repair and landscaping upgrades.
“Stream is really just putting on some lipstick to make the buildings more attractive and do the repairs required because it sat vacant for a while,” Schnittger said.
Marketing for the property has already kicked off, and because Stream is offering a leasing option, it has already received some initial interest in taking over the space.
“This is a space we’re very comfortable in and track closely,” Schnittger said of Stream’s future in the industrial market. “We’re focused on getting our business plan kicked off with the improvements and really ramp up marketing (for the property), but we still have our fishing line in the water looking for office, industrial and retail acquisitions.”
By: Katie Burke, San Antonio Business Journal