Long Term Lease with Strong Anchor Tenant Executed at 1380 Garnet
Garnet Real Estate is a Growth Series Investment
The manager has provided us with the following update on our investment in this San Diego, CA development:
The site has been prepped for construction and all building materials have been ordered with an anticipated mid-July delivery of certificate of occupancy to new tenants.
A lease is expected to be fully executed next week with Better Buzz Coffee which has performed strongly at other locations throughout San Diego County. The company has agreed to terms taking the prime frontage space on Garnet for a ten-year term with two seven-year extension options including 3% annual rent escalations. This means Better Buzz could be under lease for 24 years if they exercise both extensions.
The property manager projected $3.50 triple net rent for this space while the lease calls for a start rate of $4.00 triple net. The property manager expects to have this lease fully executed next week and is extremely happy with this tenant and terms that outperform projections. Negotiations for office space in the back part of the building at above projected rents are taking place, and an offer for the middle remaining suite is anticipated soon.
While the delays in permits has the potential to dilute some projected returns (particularly on a short-term hold), the property manager intends to make up ground with out-performance of our lease terms, as mentioned above, as well as compress the construction period. The current momentum provides the chance to be 100% leased by mid-summer with strong tenants and at favorable terms.
With a strong anchor tenant in place, the execution phase of the deal should be complete by the end of this summer. This put the property manager in the enviable position of exploring a short-term exit, or considering a hold strategy to enjoy strong cash flows from the property for years to come in a location that continues to appreciate.