TDC purchased a portfolio of older Class B industrial properties, as well as Double R Galleria at the corners of Double R Boulevard and Prototype Drive in south Reno for $10.5 million. Courtesy Tolles Development Co.
Tolles Development Co.’s $10 million acquisition of McCarran Marketplace on South McCarran Boulevard was part of a 1031 exchange that included more than 100,000 square feet of retail and industrial space.
TDC sold partial interest in the 890,000-square-foot Airway Commerce Center industrial project at the corner of South McCarran and Airway Drive, said Kyle Rea, Tolles Development’s chief operating officer. The company began scouring the market for suitable 1031 exchange properties, and like many exchange investors, quickly found a shortage of “ideal” exchange properties.
“We were seeking yield in triple-net assets – there wasn’t a lot of appetite within our group to go for office or multifamily,” Rea said. “In retail, we couldn’t find yield in small acquisitions, but we could find it in larger acquisitions. With industrial, it was the opposite – we found yield in smaller properties, but it wasn’t there in larger properties.
“We learned very quickly that we had to be flexible with what the market was telling us,” he added. “We went into the exchange with a strategy, but sometimes your strategy doesn’t come out exactly as planned. But I feel what we ended up with makes a lot of sense.”
In addition to McCarran Marketplace (formerly Air Center Plaza), TDC purchased a portfolio of older Class B industrial properties, as well as Double R Galleria at the corner of Double R Boulevard and Prototype Drive in south Reno for $10.5 million.
The industrial properties included:
• 397-399 Greg Street at 25,000 square feet
• 860 and 870 Steneri Way, two buildings totaling 14,800 square feet
• 5425 Louie Lane at 24,060 square feet
McCarran Marketplace is 52,000 square feet and is slated for $2.5 million in upgrades to reposition the center into a boutique retail destination. The industrial acquisitions also represent value-add opportunities, Rea said. Additionally, he noted, the entire 1031 exchange portfolio represents a long-term hold opportunity to deliver cash flow while offering local businesses slightly below-market rate rents.
“This is a much more measured and slow-growth business plan,” Rea said. “We will add value where it makes sense. It’s a long-term community investment to support local businesses with modestly reduced rents because we know we are going to have a long-term relationship with them.”
McCarran Marketplace reflects its age – it was built by Dermody Properties in 1988, Rea said. Renovation work includes adding modern facades, new interiors, landscaping, and creation of common areas and dining patios. Tenant improvement for restaurants interested in space will include all-new kitchens, dining rooms, and anything else prospective tenants require, Rea added. Work is expected to begin this summer and take four to six months. OneStudio D+A is the architect, and Pinecrest Construction & Development is the general contractor.
Courtesy Tolles Development Co.
Tolles Development Co.’s $10 million acquisition of McCarran Marketplace on South McCarran Boulevard was part of a 1031 exchange that included more than 100,000 square feet of retail and industrial space.
Traffic counts along that section of McCarran Boulevard are upward of 60,000 vehicles per day.
“That center can serve a broader audience just based on how many people drive by it every day,” Rea said. “This center quite honestly is just below market. By investing in the center and lifting up rents modestly, that will add some interesting food, dining and shopping to an area where people need more options.”
Local burger favorite Juicy’s Giant Hamburgers will remain at McCarran Marketplace, but many current tenants will not make the transition. Rea noted that the aging center was home to a massage parlor that was evicted by TDC on March 13 after a seven-month long investigation into prostitution by the Reno Police Department’s Human Exploitation and Trafficking unit.
A major goal of repositioning the center is to include a more upscale mix of tenants, Rea said.
“It needs a professional landlord to do the right thing,” he said. “The current tenant mix is slightly indicative of the old mindset of letting any business come in. Our mindset is a much more active development approach because doing what is right for the community is also doing what is right for our business.”
Ian Cochran and Greg Ruzzine with Logic Commercial Real Estate will handle leasing for McCarran Marketplace. They also brokered the sale of the property, along with Double R Galleria, which was acquired in an off-market transaction.
Cochran brokered the sale of the Greg Street property for TDC, while Sam Douglass of Nevada Commercial Group represented the seller. Matt Harris and Christian Stolo of Street Commercial Real Estate brokered the sale of the Louie Lane asset. The Steneri property was acquired directly from the property owner, Rea said.
While the industrial assets may undergo some modernization in the future, Tolles Development Co., acquired Double R Galleria due to its position in that part of the bustling South Meadows office and industrial submarket.
“We liked the rent roll and the property,” Rea said. “It goes back to supply – there is nothing retail-wise that will be built in that submarket on the horizon, and whenever you have got a supply-constrained market, we feel good over the long-term about modest rent growth, and when there’s a vacancy it will be easy to lease back up.”