National Retail Properties' Jon Adamo likes buying LA Fitness locations because he knows what he's getting: well-established tenants and long-term leases.
"In our opinion, there's nobody better," said Adamo, vice president of acquisitions for the Orlando, Fla.-based real estate investment trust, which had $4 billion in assets in 2012. "They're a great operator. They're at the top of the heap. "
In a deal that closed Dec. 11, the REIT added its 18th LA Fitness location to its portfolio, paying $13.83 million in cash for the club at 3555 Highway 100 S. in St. Louis Park. The club, built in 2010, is at the northeast corner of Highway 100 and West 36th Street, where a former Ford dealership once sold cars.
The purchase price for the 51,305-square-foot building breaks down to about $269.47 per square foot.
The seller is Minnetonka-based 7 & 41 LLC, which paid $9.15 million to acquire the property in February 2008. The company didn't respond to a call seeking comment Monday. Hennepin County values the property at $10.5 million.
Adamo said his company plans to hold on to the property long term and collect rent. The existing lease with LA Fitness calls for a steady return, he said.
"We'll do those deals all day long, if we can find them like that," he said.
National Retail Properties' interest in St. Louis Park was also piqued by ongoing residential development in the area. The gym is kitty-corner from the recently opened 36 Park Apartments, a 192-unit complex at 3601 Park Center Blvd., and is directly north across West 36th Street from a Target store.
Several residential projects have also sprung up within about a half-mile west of the gym, just on the other side of Highway 100. Developments open or under construction include the 115-unit TowerLight senior housing project at 3601 Wooddale Ave. S. and the Hoigaard Village apartment, loft and town home complex off West 36th Street and Xenwood Avenue South.
Veteran development consultant Jim McComb said Monday that such a strong residential base increases a health club's attractiveness to potential investors.
"St. Louis Park has a good market," he said. "A business located there will have a solid trade area. "
McComb said the club's location just off Highway 100 is ideal, although access to that part of St. Louis Park can be tricky. But health clubs, much like auto dealerships, are destination businesses and perform well with or without superb access.
"They pull for several miles," McComb said.
The gym is also about three blocks southwest of a planned stop along the 14.5-mile Southwest Light Rail Transit line. A station is planned near where Beltline Boulevard intersects with Park Glen Road. Adamo said Monday that the LRT didn't spur the purchase, but it adds even more value to the building.
The health club joins several other National Retail Properties holdings around the metro, including a Guitar Center store in Roseville, a Denny's restaurant in Maplewood and several other single-tenant commercial buildings. Adamo said the company is always looking for attractive deals in the Minneapolis area, especially with companies they've worked with before.
"We like Minneapolis, we like the market," he said. "To the extent an opportunity presents itself with one of our relationship tenants, we'll certainly have interest in that. "
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