Discount Tire HQ Rolls for $31M

The $31.4-million sale put about $5.9 million of net proceeds in the pockets of Scottsdale Thompson Peak LLC, a subsidiary of Phoenix-based Stratford American Corp. "We had quite a heated competition," says Eric Wichterman, a senior vice president with Grubb & Ellis/BRE Commercial LLC who brokered the deal along with senior vice presidents Brian Lee and Stan Schafer. "(The interest) came mostly from private sector buyers because there's not really that much cash flow."

Wichterman tells GlobeSt.com that the two-story building, developed in 2003 by Opus Corp., traded at a 6.68% cap. Holualoa Arizona Inc. assumed a $20-million loan from Allianz Life Insurance that runs co-terminus with the Discount Tire lease andfully amortizes by the end of the lease. "Having a short amortization makes the cash-on-cash return about 4%," he says.

"The thought is to just park the money and make a small return that will slowly grow into decent cash flow…The big bump in value will occur 21 years down the road because the rental rate is about $5 under market," Wichterman says. "It's kind of like saying this real estate market is so hot let's put our money in bonds. But this way they get a lot more than what they paid for in the end…There's a lot upside with the rents."

The building, which sits on nearly six acres, boasts underground parking and very extensive interior build-out, funded primarily by Discount Tire, according to Wichterman. Earlier this year, Holualoa Arizona acquired Hayden Square, a 107,000-sf office and retail complex at 51 W. 3rd St. in Tempe for $16.6 million.