A new player in Houston’s commercial real estate market has sold off its first industrial park in the Bayou City.
Houston-based builders Vault Partners sold five free-standing buildings totaling 85,000 square feet of space at Vault 529 Industrial Business Park located at 13738 FM 529 in Northwest Houston in mid-July.
The sale was an interesting move, given that U.S. industrial vacancy fell to a 27-year low in May and that Houston is in the midst of an industrial construction boom that has it in second place behind Dallas.
The Lone Star State’s two biggest cities account for more than 20 percent of the 700 million square feet of industrial space under construction nationally.
Josh Tillis, a managing director at Vault Partners told The Real Deal the company would have preferred renting the building to tenants but 80 percent of inquiries were from buyers rather than renters because of the size of the buildings.
”Financially it would have been better actually to lease it than sell them at cap rate,” he said.
Tillis declined to disclose how much the sale of the property netted Vault but he noted timing and demand in Houston’s booming industrial market allowed the company to make a quick exit within the first month of the warehouses being built.
Vault’s move to sell the warehouses instead of renting was made easier because in June 2020, when the company broke ground it was cheaper to build compared to now.
“It’s really unique to this economy and situation because we locked in when construction costs were okay,” Tillis added.
A lingerie company, a cell phone and software distributor and an oil recycling company will be setting up shop at three of the properties. The buyer of two of the warehouses will lease the buildings, Tillis said.
Vault also has another Houston project in the works.
The company has a 16-acre site in South Houston under contract and has plans to build a 185,000-square-foot “rear-loader” facility and a multitenant 44,000-square-foot industrial park, Tillis said.
Vault is looking at industrial opportunities nationwide, as well, said TJ Cholnoky, a Vault managing director who recently joined the company from Newmark.
“We have a project in St. Louis, so we’re not just constrained to Texas and we’re out there looking for land, existing buildings as well, multi-tenant shallow bay industrial,” Cholnoky added.
Vault is also looking for distressed assets.
“We’re trying to be patient, I think we’re trying to find deals that are distressed and take advantage that we don’t hold a lot of assets right now that are distressed and over-levered,” Tillis said. “I think we’re positioned well, we haven’t lost any deals, we haven’t done badly on any deals and we haven’t burned any bridges with investors.”
NAI Partners’ Darren O’Conor brokered the deals with the four different buyers.
Vault Partners, is headed by Michael Rubenstein, a former director of legal and real estate at Houston Astros owner Jim Crane’s Crane Worldwide Logistics, and other executives with stops at Fortress Investment Group, the Friedkin Group and Goldman Sachs.