Realty Income (REIT) Completes Sale and Leaseback Transaction

NNN Lease Market News

RESTON, VA-Realty Income (NYSE: O), an Escondido, CA-based REIT, has acquired a 12-asset owner occupied industrial portfolio located across the US in a sale leaseback transaction, Calkain Cos., tells GlobeSt.com in an exclusive interview. The purchase price, value of the real estate portfolio and seller are not disclosed, Calkain’s EVP David Sobelman tells GlobeSt.com. “The size of the portfolio is 300,000-square feet but other than that, due to the confidentiality clause, there is little else we can disclose.”

That said, the transaction, between institutional investors, is a significant one - as well as illustrative of a growing trend Sobelman has noted: the use of sale leasebacks as a way for buyers of properties to monetize recent acquisitions as quickly as possible. “I would say this is definitely something we are seeing more and more of, especially among private equity firms,” he says.

This particular trade began as an acquisition by a private equity company based in the Southeast, of an environmental services company that owned and occupied 12 industrial facilities in eight states. “Because of its business model the private equity company did not want to keep the real estate,” Sobelman says. “Instead it realized that the real estate portfolio could pay back a significant portion of its initial investment through a sale leaseback transaction.”

A sale leaseback is very simple really. Sometimes known as a sale leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. The purpose of the leaseback is to free up the original owner's capital while allowing the owner to retain possession and use of the property. The type of property involved can be anything from residential or commercial real estate to equipment or vehicles.
A leaseback can be beneficial for the buyer and seller alike. The seller attains a lump sum of cash quickly and the buyer acquires a lower than market value purchase price, along with a long-term lease at a premium rate. The lease amount provides periodic income and may even be enough to pay the buyer's mortgage, if he or she borrowed money to obtain the property. A leaseback can be a great investment tool, one that yields a high return. As with any investment, however, there are associated risks.

The private equity company retained Calkain, which brokered the deal with Realty Income. “Because of the number of locations and their geographic distribution we knew that private investors would not be interested in a portfolio like this. It would have to be a REIT or another institutional investor,” Sobelman says.

http://www.calkain.com/

NNN Investment Property in Florida No Management Responsibilities

NNN Lease Market News

Calkain Companies, a national real estate investment brokerage firm, recently procured the $900,000 sale of a Burger King NNN investment property in Fort Myers, Florida. The property at 9041 College Parkway is operated by Furman's Inc, a regional franchisee of Burger King for over 30 years. The property is situated on .9 acres of land at the hard corner of College Parkway and South Pointe Blvd.

Patrick Nutt, Senior Associate of Calkain Realty Advisors, the private market division of Calkain Companies, represented both parties in this transaction. Nutt commented, "The real estate was the driving force on this deal. It's a quality corner where the tenant has occupied the space for a very long time." Nutt continued, "Even after seeing effective rents in the market decrease over the past two years, the existing lease is well below market, offering the buyer potential upside at the end of this lease term."

This sale marks the third closing in less than a month for Nutt, possibly signaling a turn in the perception of the investment market. Nutt remarked, "If you have a high credit tenant or high quality real estate, there is considerable demand for those assets, often attracting cash buyers looking to capitalize on the higher returns offered in net lease investments compared to the historically low interest rates of a traditional certificate of deposit or money market account."   

Meanwhile, Burger King franchisees are spending big to take part in Burger King's massive, chain-wide remodeling program. The plan calls for all 12,000 worldwide stores to be fitted with rotating chandeliers, electronic-screen menus, and walls of brick and corrugated steel. The cost is reportedly between $300,000 and $600,000 per store.

 It's all very confusing for the fast-food consumer. Burger King, even while positioning itself as the place to procure sacks of cheap burgers to be eaten on the run, also seems intent on also competing directly with "fast casual" chains like Chipotle (CMG) and Panera (PNRA), and even with straight-up, sit-down restaurants like Applebee's.

McDonald's, meanwhile, is offering premium, high-margin products, but without shedding its fast-food identity. Everything it sells -- the premium stuff, the healthy stuff, the coffee -- is affordable and convenient. And while it, too, is upgrading its stores, it's not trying to make them look like anything other than McDonald's outlets, where you can grab what you need and be on your way.

It will be interesting to see what the new Brazilian owners will make of Burger King's grandiose vision. Chidsey will step down as CEO, but will remain as a co-chairman along with Alex Behring, 3G's managing director. Supposedly they'll work together to find a new chief.

So far, a few dozen outlets have taken part in the remodeling. While the revamped stores, according to the company, have boosted sales by 12% to 15%, 3G will be looking for ways to cut costs (as is the wont of PE shops) as well as cheaper ways to boost the top line. Of course, 3G has promised to invest big in the chain, but given that it's paying $4 billion, or $24 a share -- a 46% premium to its share price earlier this week -- the new owners will have to show much more care in deploying such investments than Burger King has during its four-year life. NNN properties for sale are typically free standing buildings that are leased to tenants for a 10 to 25 year term. They offer the benefit of little or no management responsibilities as the tenant pays for all, if not most of the expenses. The investor receives their rent with little to no other involvement.

http://www.calkain.com/

Dollar General in Folkston, GA Sold

Reston, VA - Calkain Companies', a national real estate investment brokerage firm, recently completed the sale of a Dollar General store located in Folkston, GA. The 9,014 SF investment property is leased to Dollar General on a long-term, double net (NN) basis. The purchaser was a private investor seeking a passive, incoming-producing asset leased to a national tenant.
Calkain's Rich Murphy brokered the transaction on the buy side and worked with Bill Weitzenkorn from Tri-Oak Commercial who represented the seller. Calkain utilized its extensive database to match its buyer up with properties that would fit their investment strategy. “Knowing the buyer's criteria, it was a matter of finding an attractive property at the right price point,” says Murphy. “This property was actually a relocation of an existing successful Dollar General. That along with a solid location and an excellent CAP rate made this a great transaction for all involved,” adds Murphy. The asset traded at an 8.9% CAP rate, illustrating that good deals exist out there for those willing to look hard enough. This Dollar General deal represents the type of stable asset that investors are focused on purchasing in the current environment.
The transaction closed within the last thirty days and is recorded in the public record.
Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Florida, Maryland and Delaware. Additional information about the firm and its listings may be found at
http://www.calkain.com/