Hanley Investment Group Completes Sale of Brand-New Single-Tenant LA Fitness in Temecula for $13 Million, 6.13 Percent Cap Rate

Temecula, Ca – Hanley Investment Group Real Estate Advisors, has arranged the sale of a brand-new single-tenant net-lease investment occupied by LA Fitness in Temecula, California. The property is strategically positioned at the major intersection of Temecula Parkway (CA-79) and Interstate-15, the first major thoroughfare for traffic entering the Temecula Valley. The sale price was $13 million, representing a cap rate of 6.13 percent.

Hanley Investment Group Senior Associate Austin Blodgett and Executive Vice President Eric Wohl represented the seller, a private developer based in Irvine, California. The buyer, a family trust from Los Angeles, was represented by Richard Lee of R&L Properties-Cerritos Inc. of Corona, California.

Completed earlier this year, the new 37,000-square-foot single-tenant building is situated on 3.69 acres at 29920 Temecula Parkway. According to Blodgett, this property benefits from the large monument signage, direct frontage on Temecula Parkway (68,000 cars per day), and its freeway-visible location near the Interstate 15 on/off ramp (176,000 cars per day). The property is an anchor to the Gateway to Temecula, a brand-new lifestyle center that contains approximately 61,000 square feet of commercial space including Starbucks with a 24-hour drive-thru, Chevron and Car Wash, Verizon Wireless, The Pizza Press, and 4,000 square feet of office.

According to Blodgett, LA Fitness just executed a brand-new 15-year primary lease term with a number of renewal options. “This is a rare sale of a single-tenant LA Fitness in Southern California. This location has low rent for a new-construction LA Fitness, which is what ultimately got the buyer comfortable paying this cap rate,” said Blodgett. “Four single-tenant LA Fitness investments sold in California in the last 18 months, with Hanley Investment Group selling two of the four properties. LA Fitness is the #1 health club in the nation and the most attractive health club investment in today’s market.”

Hanley Investment Group procured multiple offers and selected a highly-qualified buyer that closed in under 60 days after the property was listed by another firm for approximately six months. “This property shows extremely well with top-notch construction and a prime location, making it an excellent long-term investment for the buyer. We worked closely with the lender and third parties to help the buyer secure the desired financing in the allotted timeframe,” said Wohl.

According to Wohl, “The Inland Empire market is the second fastest-growing region in California. The five-mile population has grown over 81 percent since 2000, making it one of the fastest growing submarkets in California. Temecula in its self is booming with development projects like the $300 million expansion of Pechanga Resort and Casino, a new 1,750-unit master planned community called Altair, and over $24 million in road improvements to the I-15 Interchange to handle the increase in traffic to the region.”

“Health clubs continue to be an attractive investment for investors looking for an internet-resistant tenant that can outstand the effect of e-commerce. LA Fitness continues to achieve lower cap rates than other national tenants like 24 Hour Fitness, purely because of LA Fitness’ national presence and the fact that you are getting more locations backing the lease over any other health club chain nationwide,” said Blodgett.

LA Fitness is an American gym chain with more than 700 clubs across the United States and Canada. The company was formed in 1984 and is based in Irvine, California.

According to the Global Wellness Institute, the wellness industry is a $4.2 trillion business (2017). It grew 12.8 percent from 2015 to 2017 and is forecasted to grow 6.4 percent to 8 percent in the next five years. To put that in an economic context, from 2015-2017, the wellness economy grew 6.4 percent annually, nearly twice as fast as global economic growth (3.6 percent). Wellness expenditures ($4.2 trillion) are now more than half as large as total global health expenditures ($7.3 trillion). And the wellness industry represents 5.3 percent of global economic output.

Racquet & Sportsclub Association (IHRSA) reported that global health club industry revenue totaled $87.2 billion in 2017, as more than 201,000 clubs served 174 million members. In the U.S., health club membership grew from 45.6 members in 2008 to 60.9 million, a growth of 33.6 percent.

“With investors’ appetite for high-quality, single-tenant retail properties, and consumers’ continued interest in fitness and health, we expect that well-located single-tenant, net-leased properties occupied by LA Fitness with long-term leases will continue to be in high demand,” noted Blodgett. Hanley Investment Group currently has several single-tenant health clubs listed for sale.

About Hanley Investment Group
Hanley Investment Group Real Estate Advisors is a retail investment advisory firm with a $6 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.