Cobalt Capital Partners LP's $55 million purchase of the largest industrial portfolio ever to sell in Kansas City is a sign of the times, said David Hinchman of CB Richard Ellis Group Inc.
"We are on everyone's radar screen," said Hinchman, who represented TA Associates Realty of Boston, which sold the 1.7 million-square-foot portfolio.
The deal was suburban Dallas-based Cobalt's first in Kansas City. Hinchman said he's getting calls from a growing number of large out-of-town players who like Kansas City's growth and the chance to lock in better returns than in the traditional industrial centers.
The area's greatest limitation, a lack of improved sites for new industrial construction, is being addressed by development planned around proposed intermodal sites near Gardner and at the former Richards-Gebaur Memorial Airport in south Kansas City.
Hinchman called Kansas City "a solid second-tier market" that's comparing more favorably with places such as Dallas, No. 4 on CB's national list of industrial markets, and No. 9 Atlanta.
Although Kansas City's deal velocity is less than that of larger markets, Hinchman said, average capitalization rates on sales are as much as 2 percentage points higher. These rates measure the yield on investment based on properties' prior net operating income. The area's industrial-sector growth improves properties' earnings potential, he said.
"People believe in Kansas City," he said. "They believe in the momentum we're starting to create."
Institutional investors' interest in Kansas City isn't limited to the industrial side. Office offerings also are getting more attention. This month, a pair of suburban Philadelphia buyers bought the Corporate Woods office park for $290 million.
Kansas City office buyers also see a cap rate differential.
Colliers International pegged Kansas City's suburban cap rate at 8 percent and its central business district cap rate at 8.5 percent at the end of the third quarter. In Chicago, comparable rates were 5.5 percent and 7.25 percent.
Cobalt Capital Partners
Value: $55 million
Location: Four bulk warehouses in North Kansas City's Paseo Industrial District, three near Kansas City International Airport and one in Executive Park in northeast Kansas City; also includes a manufacturing building in Lenexa
Players: Cobalt Capital Partners LP of suburban Dallas, TA Associates Realty of Boston
Description: Cobalt's August purchase was its first in Kansas City.
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