Our Latest Acquisition
May 14, 2008
We’re pleased to announce our latest acquisition, a 7,200 SF retail strip center at the front door to the Wal-mart Supercenter in Troy, Alabama.
Typically we’ll look at 75-100 deals before we find one that fits our criteria and that we purchase. We thought it might be helpful to explain to brokers (or whoever is reading our blog) what we’re looking for in a deal and how we found that in this property.
The Troy strip has 4 tenants, Rent-A-Center (RAC), Advance America, Alltel and a billboard ground lease (all national or at least regional credit tenants). The center is only 3.5 years old and was built as a build-to-suit for RAC. Four years ago the southern part of Troy was just starting to grow and therefore rents were low. The original lease had RAC at $11.50 PSF and Advance America at $12.00. After the center was built, the developer signed Alltel at around $16.00 PSF.
After undertaking a market survey of existing centers, we found that the market rate in the area is now $16 to $18 PSF and that there were very few vacancies. We were therefore buying a center with below market rents in an excellent location and the price we paid for the building was less than we could build it for today. Unfortunately we paid a premium for the in-place rents, but don’t mind doing this as our upside occurs at lease expirations. We prefer this scenario over buying a center with above or at market rents where you get to catch a bullet if your tenants blow out. Finally, we’ll only buy in a small town like Troy if there are clear signs that it is growing and is forecasted to continue to do so.
In Summary, we like:
* Below Market Rents
* Excellent Locations
* Below Replacement Costs
* Growing Markets
A Realpoint LLC analysis of 75,002 mortgages that serve as collateral for 700 CMBS transactions in the United States found that 6,457 of those loans, representing $73.7 billion or 8.8 percent of the CMBS universe, are set to mature by next March. Of those, 1,125 loans with a balance of $17.8 billion could face problems because their collateral properties might not generate enough cash flow to support new mortgages that are as big as their existing loans. On the positive side, the report said because most of the remaining loans were originated 10 or more years ago, when interest rates were higher than they are today, they should have no problems getting refinanced. Those loans have also benefited from a general increase in property values.
Some Hopeful Economic Signs
May 1, 2008
Are the new, higher prices for food, oil and metals here to stay? Or are these commodities in the middle of a speculative bubble? Unless you live in Houston, Dubai or Nebraska, you hope its a bubble. Below are two articles that argue these new higher prices aren’t here to stay. Let’s hope they are right.
Could oil mania be coming to an end?
Déjà Vu: The Fed’s Interest Rate Dilemma
