Hourigan sells Lowe’s-anchored Southside warehouse for $128M

The $127.7 million deal for the 1.2 million square foot warehouse at 3021 Commerce Road in Deepwater Industrial Park was the second largest deal in the city this year. (Photo by Mike Platania)

Turns out Lowe’s is worth having as a long-term tenant.

Earlier this week, the 1.2 million-square-foot warehouse at 3021 Commerce Road in Deepwater Industrial Park sold for $127.7 million, city records show.

The newly built distribution center got Lowe’s as a tenant after home improvement giant opposed a similarly sized distribution facility in Hannover.

The new owner of the property is Realty Income Corp., a publicly traded real estate investment trust in California.

The seller in the deal was Hourigan Development, the local company that Deepwater industrial park built. When Hourigan bought the 110-acre piece of land for $8.5 million about five years ago, there were 17 vintage warehouses on the site. These were demolished to make way for the new industrial park.

Not included in Realty Income’s purchase were a pair of parcels at 2301 and 3205 Commerce Road that Hourigan continues to own. The two parcels total 35 acres and approximately 300,000 square feet of industrial space are being built on them.

City records show the Realty Income deal closed on Nov. 1. The parcel was most recently appraised at $6.2 million.

Hourigan Development founder and CEO Mark Hourigan declined to comment, as did a spokesman for Realty Income Corp.

According to its website, Realty Income Corp. has nearly 12,000 properties in its portfolio, 347 of which are in Virginia. The extent of his holdings in the Richmond region is unclear, although he still owns a tobacco packing plant in Chester that bought in 2015 for $16 million.

At nearly $128 million, the sale is the second largest real estate deal in city limits so far this year. The first position is occupied by the $150 million sale of Gateway Plaza in July.

Evan Magrill

Evan Magrill, a Thalhimer broker with nearly 30 years of experience working in industrial businesses, said he sees the Realty Income-Hourigan transaction as a sign of the strength of the local industrial market. He said industrial space in the region has a vacancy rate of around 2 percent.

“(Industrial) product type has been in favor: More companies are stocking more goods and the economy has been good,” said Magrill, who did not work on the sale of the Lowe’s building. “We don’t see a decline in sight. The pace may slow down, but it’s still a very strong market.”

The Lowe’s building sold for about $106 a square foot, a rate that Magrill says is also indicative of the times.

“A few years ago ($106 per square foot) would have seemed high to me. It doesn’t seem so tall to me today,” she said. “Construction costs are much higher than in the past. They are expensive to build, rented out and ready for tenants. It is a good value for the seller, without a doubt.”

Magrill said we may also be seeing the effects of rising interest rates on the pace and structure of industrial deals.

“This one may have been rushed due to rising interest rates. Maybe the buyer wanted to get the financing from him before (interest rates) went up,” Magrill said.

“There may be some accelerated selling right now, but it’s also hard to predict what interest rates will do over a longer period of time. We may see people using adjustable rate financing or doing short-term financing and long-term leverage at a later date. It’s hard to say.”

Hourigan, meanwhile, has another big kitchen project on the Southside.

The firm plans raze the old silos of the southern states at 2-4 Manchester Road and build a 20-story apartment tower and a six-story office building.

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