NNN Investment in Spring Hill, FL Sold

NNN  Lease Market News

Sale of Multi-Tenant NNN Investment in Spring Hill, FL

Calkain Companies, a national net lease commercial real estate firm, recently brokered the sale of a multi-tenant, NNN investment in Spring Hill, Florida. The two-tenant investment property is situated on 1.08+/- acres with high visibility to busy US HWY 19, just 30 minutes North of Tampa. It is occupied by Pet Supermarket, based out of Sunrise, Florida. BBB- rated, Humana Marketplace, headquartered in Kentucky is also a tenant.

The site is a 9000+/-sf building divided into 7000+/-sf for Pet Supermarket and 2000+/-sf for Humana. Pet Supermarket renewed their lease for 7 years with structured increases and options and Humana exercised their 2 year option. The seller, an experienced private owner and long-time client of Calkain, was looking to liquidate to secure other opportunities. The property sold for $1.61MM which is a 8% cap rate to a private Florida based buyer completing a 1031 exchange.

Calkain Associate, Teal Henderson, who was recently tapped to open the new Midwest office in St. Louis, MO from Tampa, exclusively represented the private seller and provided marketing and transaction support services throughout the sales process. The property was initially introduced to the market with quickly expiring leases. Henderson commented, "We quickly recognized the hurdle of the current lease terms being unfavorable along with the tertiary and lesser known Florida location of Spring Hill. We counseled the seller in reaching out to the tenants and restructuring with more attractive terms. Then after successful negotiations, we re-introduced the property on the market and generated a quick contract. A private buyer interested in a Florida property with an investment grade tenant with ties to the medical industry purchased the asset." As a NNN ground lease, this investment requires that the tenant pay for real estate taxes, insurance, and maintenance expenses, which effectively provides the landlord with a passive, bond-like income stream through commercial real estate ownership. The transaction occurred within the last 15 days and will be recorded in the public records.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast, Northeast and a new office opening in the Midwest. Additional information about the firm and listings may be found at 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/

Questions and Answers About Today’s Net lease Market

NNN Lease Market News

Can you quantify cap rate differences by market for the same credit tenant?

Demand for credit rated property within the MSA of the elite primary markets is strong but the lack of product means that a NNN net investor is going to pay a premium for that property. The spread for credit rated tenants can vary by up to 100 basis points if you are in New York or Washington, D.C. versus other primary market cities with another modest drop in cap as you enter the secondary and tertiary markets around the country. There is not as significant a variance in the recorded caps for credit rated tenants in secondary, tertiary and the primary markets outside of the elite group mentioned above. A review of closed transactions in 2010 shows that a Walgreens minutes from D.C. in suburban Virginia might sell for a 6.5 cap or better whereas a similar property might sell at a 7.5 cap in Philadelphia.

How do investors weigh credit tenant versus strong location and market?

The greatest disparity in cap rates between markets can be seen in the transactions recorded for non-credit rated tenants. At the height of the market, investors often looked at NNN net properties with the same overly optimistic view as their well-documented counterparts in residential real estate. Today, NNN net investors rightly focus on core real estate fundamentals, the survivability and strength of the tenant and the landlord’s ability to replace the tenant and rent should the tenant fail. NNN net investors are buying national non-credit rated tenants and local mom and pop shops in the elite markets if the performance and prospects of the tenant is known and the underlying real estate is strong. In D.C., the seller of a NNN net retail condominium with a local tenant operating a quick-serve restaurant in the heart of a thriving urban market sold at a 7 percent cap rate. By comparison, non-credit retail properties outside of the primary markets trade from 50 to 200 basis points higher than their primary market counterparts.

Have you seen a difference in debt terms based on geography or is it just on the investor side?

Debt terms do vary by market and tenant with a local lender the only prospect for debt in some markets. National lenders continue to pull back in many cities but insurers and the big banks are financing a great variety of transactions in the primary markets.

As the supply of NNN net property remains limited, do you see investors moving towards lower credit or other markets?

In today’s market, suitable NNN net investment property is hard to find. Quality NNNnet investment property is harder still. Perhaps hardest of all are the $1 million to $5 million size transactions where average investors focus their attention. For many of these investors, as with many of the REITs, the return will not be equal to the risks associated with non-credit tenants in secondary and tertiary markets and they will remain on the sideline.

www.calkain.com/read-more-news.