The Search Continues…Core like real estate assets — those good-quality buildings in great locations, fully lease with predictable income have become a myth over the last several years as the low interest rate environment push pricing to never before seen levels. It isn’t sufficient to just to identify the right markets and buy the right real estate assets. Today, more than ever strategic hands on asset management is necessary to drive returns.
Outlook 12—36 months
We do believe that interest rates are going to rise over the next 6-24 months and this uptick in rates will negatively impact cap rates. And the cost of capital will increase significantly. But if you are thinking about cash flow and relative value between markets, then there’s more choice and more ability to be selective
We have expanded our focus to acquiring quality real estate in high growth markets. We are seeking capital partners and would welcome the opportunity to speak with you to discuss our approach and whether this aligns with your objectives. We are experience with sourcing, underwriting and negotiating deals.
Real Estate Opportunities March18
Major Tenant Files #Bankruptcy – WHEELER’s IMPACT
Q: How many stores are being recaptured?
A: In total there are five anticipated recaptures. The Company has elected to recapture four locations, Ladson Crossing, St. Matthews, South Park and Tampa Festival. Based on other grocery operators’ interest, the Company believes there is an opportunity to enhance the value of these centers outside of SEG tenancy.
In addition to these recaptures, and as previously announced during the second quarter of 2017, BI-LO at Cypress Shopping Center in Boiling Springs, SC will not be renewing its lease that is due to expire on March 31, 2018. The Company is in preliminary negotiations with two grocery operators to backfill this location.
Q: When do you expect to recapture these stores?
A: While this may occur earlier, the effective date on three of the leases is anticipated to be on April 30, 2018, with one more lease becoming effective on June 30, 2018.
Q: Was there any monetary consideration given as part of the termination agreements?
A: Yes, through a combination of termination fees and existing lease obligations, the Company received approximately $590,000. At the request of the potential backfill operators, the Company has retained the furniture, fixtures and equipment for three of the four locations, which will be used as part of the backfill plan going forward.
Q: What is the estimated annualized base rent Impact?
A: Assuming the prepackaged negotiated terms that the Company has executed are affirmed by the bankruptcy court, it is estimated that the initial annualized base rent impact of these lease modifications and recaptures will be approximately $2.5 million. However, the Company believes the impact could be reduced to less than $1.5 million upon the successful backfill of the recaptured locations.
Q: What will your SEG exposure be if all of the lease amendments are approved by the bankruptcy court?
A: Based on the annualized base rent from its core portfolio, the Company’s exposure to SEG will be reduced from 12.21% of ABR to 7.57% of ABR.