Industrial Building – Garden Grove, California

This property is a 42,000 square foot industrial warehouse located in an industrial park in Orange County, California. We purchased it from the tenant on a sale-lease-back arrangement. The tenant is Chefmaster Company and the space is used for light manufacturing and distribution of food products. The lease is for seven years with two/five-year options at market rent. There is also an 8% rent increase beginning in year four of the lease. The property was purchased on a cap rate of 6.32%.

We secured a relatively low 13% mortgage at an interest rate of 7.375%. We plan to refinance this property with a traditional mortgage and purchase another property with the proceeds. After deducting for management fees and interest payments the cash-on-cash return is 5.91%. The effective rate of return is 6.13%.

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