Investment Sales - Case Studies

Single-Tenant Drug Store Portfolio: Investment Sale

 

Transaction Summary:

Target Rock Partners was selected by an institutional investor to identify a buyer for a portfolio of 15 single-tenant, net-leased drug stores located throughout the United States.  The tenants were all investment rated with remaining lease terms of at least 20 years.  Target Rock Partners presented the opportunity to its best relationships and sold the portfolio at the above-market asking price in an off-market transaction. 

 

Challenges:

  • Above market price expectations.

  • Secondary and tertiary markets.

  • Non-exclusive listing assignment.

  • Requirement from seller to pre-approve a limited number of potential buyers upfront.

 

Strategy:

  • Identify a unique investor in the net-lease market that can close all cash on a large portfolio in a compressed time period. 

 

Results:

  • Target Rock Partners produced the winning bid and closed the transaction for $69.4 million.

  • Price paid for the portfolio was greater than what could have been achieved through individual sales to private or 1031 exchange buyers.  

South Carolina Grocery Anchored Center: Investment Sale

 

Transaction Summary:

Target Rock Partners was retained by the developer of a grocery anchored shopping center located in a secondary market in the Southeast to sell the property.  The 100,000 sf center was anchored by Harris Teeter, which had recently been assigned the lease by the center’s previous anchor, Lowes Foods.  Harris Teeter made a significant capital investment in the store and modeled the renovations after their flagship location in Charlotte, NC.  The center was approximately 92% occupied, with above market rents and significant rollover risk in the 40,000 sf of local shop space.  The property was encumbered by a CMBS loan with an interest rate significantly higher than the prevailing market rates and 2.5 years remaining until loan maturity.  Despite the low initial cash on cash returns to the buyer, Target Rock Partners delivered an institutional buyer to assume the loan at the seller’s asking price.

 

Challenges:

  • Secondary market.

  • Unattractive interest rate on assumable CMBS debt.

  • Timing and expense of assuming a CMBS loan.

  • Seller’s low cap rate expectations.

  • Low initial cash on cash returns to prospective buyers at the asking price.

  • Sales unavailable for new anchor tenant.

  • Stabilized property with limited upside.

  • High concentration of local shop space compared to anchor shop space.

 

Strategy:

  • Target institutional investors that were familiar with the market and experienced with the loan assumption process.

  • Focus on buyers with a strong track record of closing and operating history. 

  • Emphasize Harris Teeter’s investment into the property.

 

Results:

  • Produced an institutional buyer that met the seller’s low cap rate expectations.

California Mixed Use Office/Retail: Investment Sale

 

Transaction Summary:

Target Rock Partners was retained by the developer of a 51,000 sf mixed-use office and retail building located on the Westside of Los Angeles.  The property was built in 2007 and 100% occupied by tenants such as Bed Bath & Beyond, Wells Fargo and Starbucks.  At the time of its construction, the property received aggressive financing that reflected peak market conditions.  As the loan approached maturity, the developers engaged Target Rock Partners for refinancing and sales strategies as it became apparent that a traditional loan would be insufficient to retire the existing debt.

 

Challenges:

  • Property was overleveraged and nearing loan maturity. 

  • Conservative lending environment for mixed-use properties with second floor office space. 

  • Offers to refinance the property were dramatically below the existing debt amount.

  • Previous offers to buy the property were low and reflected the limited availability of debt.

  • Below average tenant sales and second floor office space occupied by a weak tenant.

 

Strategy:

  • Target domestic and foreign all-cash investors with appetite for primary markets, high quality tenancy and Class A product.

 

Results:

  • Identified a foreign investor eager to purchase US real estate and willing to pay a premium for the property.

  • The transaction closed all cash.

  • The developer successfully repaid its construction loan and received additional funds.

  • Exceeded market pricing by $2 million.

Single-Tenant Dollar Stores: 15-year, NNN leases

 

Transaction Summary:

Target Rock Partners was retained by a preferred developer of free-standing, single-tenant Family Dollar stores to sell the properties following completion of construction.  The Family Dollar developments are located in tertiary markets throughout the United States, with 15-year, NNN lease terms.   Each lease provides for rent increases in one of two ways:  1) a 10% increase in year 11 of the term; or, 2) increases every 3 years based on increases in CPI and subject to cap of 6%.  Target Rock Partners is actively marketing the stores.

 

Challenges:

  • Tertiary markets throughout the United States.

  • Thin development margins necessitate aggressive pricing.

  • Increasing development pipeline necessitates expeditious store sales in order to recycle developer equity into new store construction.

 

Strategy:

  • Highlight tenant’s investment grade credit.

  • Identify private REIT’s, unique investors and 1031 buyers in the net-lease market. 

 

Results:

  • TRP completed the sales of 28 stores as follows:

  1. 15 stores were sold to a private REIT as a portfolio;

  2. 13 stores were sold to individual investors in 13 separate sale transactions.

  • TRP continues to market additional stores for sale on behalf of the developer as construction commences on the sites.