825,000 SF Sells; 1M SF More Up for Grabs

SAN ANTONIO-ProLogis, the largest industrial owner in the northeastern submarket, has gained control of another 825,000 sf, one of two large blocks up for grabs at the epicenter of the city's distribution trade. The bell rings again Sept. 1 on a call for offers for 1.17 million sf of nearby space.

In both cases, the tenant mix is deemed as valuable as the 1970s- and 1980s-era space in Rittiman West and Rittiman East industrial parks near Interstate 35 and Loop 410. ProLogis' nine-building purchase from Boston-based TA Associates Realty pushed its northeastern submarket footprint to 7.4 million sf, of which 900,000 sf encircles the newest portfolio pieces. Bets are already going down that the Denver-based ProLogis will make a play for the Utah State Retirement System's 13-building portfolio as well.

ProLogis' just-bought package was on the market without an ask. Industry sources believe the portfolio brought in the $40-per-sf range given the deal's dynamics--96% leased space to 30 tenants and the location. Worldwide, ProLogis is poised to spend $460 million on 7.5 million sf, according to its latest SEC filing.

Charles Hargis, ProLogis' marketing officer in the region, says the Rittiman package "makes us a little bit more nimble" in the submarket because it has a higher office-to-warehouse ratio and smaller bays than the rest of the San Antonio portfolio. "What we value in this core group of assets is, in this area, it's the heart of the industrial in San Antonio," he stresses. "We would be able to increase our presence for future customer growth."

Still, the latest acquisition provides little to no breathing room. The warehouse space is 100% leased and the service-bay component is 96% full. ProLogis' other 78 buildings in the submarket are pushing 97% occupancy. It also owns 30 acres of developable land in the 15-million-sf submarket.

Hargis says the just-bought space has no warehouse lease rollovers for the balance of this year. American Standard, H-E-B Butt Stores Inc. and News Group are the largest tenants in the two-building, 147,000-sf Rittiman West and seven-structure, 678,000-sf Rittiman East.

But, ProLogis' eye was as focused on the tenant base as much as the real estate. "The tenant roster is definitely just as important as the physical real estate itself," Hargis tells GlobeSt.com. "A tenant mix like this with global customers in it always helps expand current relationships so you can continue to serve them be it in San Antonio, Chicago, Amsterdam or even Japan."

John Colglazier Sr. of NAI Colglazier Properties Inc. in San Antonio says the two listings represent the largest blocks of industrial space to come to market in several years in the city. He says the Utah pension fund's 82%-leased portfolio already has caught the attention of numerous institutional and private investors. Like TA Associates, the pension fund has been a long-time owner.

Colglazier says investors' buying appetites clearly are providing the incentive to sell. "They probably figure it's the right time to do so," he says. "If you're going to pick the bull's eye of the distribution market of San Antonio, it would be these buildings."