Here's your chance to be Topgolf's Germantown landlord
It's not slated to open until later this year, but the Germantown property where Topgolf plans to open by Interstate 270 and Germantown Road is being offered for sale.
Stan Johnson Co., a Tulsa, Oklahoma-based real estate brokerage, recently began marketing the ground lease Topgolf struck with property owner Matan Cos. to interested buyers. At more than 11 acres, it's one of the largest triple-net lease offerings to hit the market in the D.C. region. And it's not something Matan intended to part with when Topgolf's plans for the real estate surfaced more than two years ago.
Matan Managing Partner Mark Matan, in an interview, said he received a significant number of unsolicited calls from groups interested in buying the ground lease, and that prompted him to consider selling instead of hanging on to the real estate. The popular golf entertainment venue is a departure from the vast majority of the company's portfolio, which is more heavily weighted toward office and industrial properties with some retail sprinkled in, and Matan said the potential sale will help fuel other projects in the company's pipeline.
"We do have a portfolio of retail properties, but this is a little different," he said. "I don’t know of any 11-acre ground leases on I- 270 that have ever sold, so it’s a unique property, and for us it’s not part of our core strategy."
The sale could potentially set a new high water mark for Topgolf ground-lease sales, said BJ Feller, managing director at Stan Johnson who is part of the marketing team. Feller estimates it could sell for around $27 million, which would put it at a capitalization rate in the low 5 percent range. Cap rates are a measurement of the difference between a property's net operating income and the initial capital spent on those properties — the lower the number, the better — and the priciest Topgolf ground lease to date, in Minneapolis, recently sold for a cap rate in the mid-5 percent, Feller said.
Part of that is due to the rarity of the offering, a nearly 12-acre property with a tenant like this one, and part of it is due to the deal structure with Germantown Topgolf, where Matan didn't really have to give a substantial tenant improvement to land the deal, said Feller, who is based in the firm's Chicago office. Stan Johnson began marketing the site less than two weeks ago, he said, and more than 100 prospective buyers have already signed confidentiality agreements seeking more information ahead of a potential bid. The brokerage recently sold the ground lease on a retail site in Gainesville, Virginia, anchored by a Harris Teeter, for about $18.5 million and it is also marketing a Walgreens-anchored center in Columbia, Maryland.
Work began on the complex late last year, per Germantown Pulse, and the new Topgolf is slated to open by the end of 2019. Even if it won't be collecting rent from Topgolf at that point, Matan said he believes the facility will have a positive spillover effect on the developer's other properties in the area and potentially attract new residents and tenants.
Per Stan Johnson marketing material, Topgolf has signed on for a 20-year ground lease with rental escalations and guarantees by the venue's parent company. Offers are expected to be due by the end of March. The property is assessed at about $4 million, according to Maryland's Department of Assessments and Taxation.
The potential sale comes as Matan advances a development pipeline of around 4 million square feet, including its recent acquisition of Leidos Holdings Inc.'s (NYSE: LDOS) 44-acre Gaithersburg headquarters. Matan is seeking a range of potential tenants for that site, including office, industrial and biotech companies, and the interest level has been strong enough that the company plans to break ground speculatively later this year.
About Stan Johnson Company:
Stan Johnson Company is one of the nation’s leading commercial real estate brokerage and advisory firms that focuses exclusively on net lease transactions involving retail, office, industrial, healthcare and sale-leaseback properties. The firm provides acquisition, disposition, capital markets and advisory services for institutions, developers, investment funds and private investors across the United States. Now in its fourth decade of serving as a trusted advisor to its valued clients, Stan Johnson Company has completed more than $30 billion in transactions nationwide and is regarded as the Net Lease Authority®. To learn more about Stan Johnson Company, please visit the recently enhanced website at www.stanjohnsonco.com.