CORONA DEL MAR, CA—With fierce competition for single-tenant NNN properties, savvy real estate advisors like Orange County-based Hanley Investment Group are providing investors who have been priced out of the market with alternative retail investment opportunities. GlobeSt.com spoke with EVP Eric Wohl at Hanley to discuss what his firm is doing to give their clients a better yield in a supply-constrained market.
According to Wohl, “One of the advantages of buying a single-tenant retail property is that they are simple to own and operate with very little management required. However, with the lack of supply and strong demand driving down cap rates to the 4-5% cap rate range for many of these properties, buyers are now considering well-positioned retail properties anchored by national tenants located outside of major MSAs. These investors are willing to take on more management responsibilities in smaller markets in order to get a better yield.” In the last 12 months, Wohl has completed the sale of more than 1.6 million square feet of anchored retail located in strategic markets throughout the US.
As a an example of an anchored shopping center transaction in a secondary market, Wohl arranged the sale of the Shops at Barnes Crossing, a 75,000-square-foot neighborhood shopping center in Tupelo, MS. The city of Tupelo has an estimated population of more than 35,000 people, but its strategic location services an expansive 75 mile radius. The shopping center is anchored by Bed Bath & Beyond, Dollar Tree and David’s Bridal.
In Blaine, WA, Wohl, along with Hanley Investment Group’s president Ed Hanley and SVP Kevin Fryman, recently negotiated the sale of Blaine International Shopping Center, a well-located 130,448-square-foot grocery-anchored retail center. “Despite the town having less than 5,000 people, Blaine International is one half mile from the US-Canadian border crossing, with over 10.5 million annual crossings,” says Wohl. “The combination of the location, a strong national tenant lineup, and additional upside through leasing the center’s 30% vacancy made this an attractive property for the buyer.”
Last week, Wohl completed the sale of Cedar South Shopping Center, an 118,319-square-foot shopping center in Cedar City, UT, a city with nearly 30,000 people. Cedar South Shopping Center is anchored by Marshalls, Bealls, Staples and Dollar Tree. “Due to the smaller market size, the buyer was rewarded with an above market cap rate and an extremely attractive cash-on-cash return,” Wohl says.
According to Wohl, “Many single-tenant investors are becoming increasingly frustrated with how low cap rates have dropped. Shops at Barnes Crossing, Blaine International Center, and Cedar South are all great examples of higher yield alternative investments for buyers that are willing to take on additional management responsibilities and own properties in smaller markets.”
Wohl reports that he has a robust national pipeline of opportunities for retail investors in strategic markets throughout the US leading into Q4 2015.
Visit Hanley Investment Group at Booth #1521 at the ICSC Western Division Conference & Deal Making in San Diego.