Biff McGuire, CEO of UDC Global, tells GlobeSt.com that there is a nine-year window to drain the fund, but more likely than not it will be spent within four years and possibly expanded. "We can easily deploy it in four years if we find the right quality of development," says McGuire. His Fort Worth-based company, N3 Real Estate, was bought last year by United Investment and rolled into UDC Global, which is the US holding company.
N3 will be the fund's exclusive developer for a strategy that includes taking on development partners in joint venture marriages. As he digs into discussions with developers in California and Florida, McGuire says there is $30 million to $50 million of deals in the pipeline. "With a lot of developers losing equity partners and equity requirements so high, we're spending a lot of time talking to them," he says.
N3's 14-property portfolio in Texas, Oklahoma and Florida planted a $40-million seed for the $1-billion push. On average, each asset is 10,000 sf and secured by a lease with at least 10 years left on the term. McGuire says work is wrapping on the last seven buildings of the newly developed portfolio. The tenant roster includes Starbucks, Chase Bank, Sonic, Whataburger, Game Stop and Alltel.
In putting the fund to work, McGuire says the majority of the capital will be used to develop predominately credit-tenant, net-leased retail boxes. The spotlight is pointed at single-tenant properties, but multi-tenant strips aren't being ruled out. The preference is 40,000 sf or less backed by minimum 10-year leases.
Based on the criteria, McGuire says the fund should end up with 300 to 500 assets. And, he says the door is wide open for the exit strategy. "We could take this public, securitize it, sell it or hold it as is," he says.
Key to the plan is to build a geographically diversified portfolio, according to McGuire. The target markets are Arizona, California, the Carolinas, Florida, Georgia, Nevada, Oklahoma and Texas.
SNS REAAL, parent of SNS Property Finance, opened an office in Washington, DC to support its US push. The parent is a publicly traded Netherlands bank and insurance provider fueled by government-sponsored pension funds.
[IMGCAP(2)]McGuire says the lion's share of the $1 billion fund has ties to Holland. United Investment and SNS started JV talks in September 2007. Last year, McGuire brought on board, Brenna A. Wadleigh, Crescent Real Estate Equities' former vice president of strategic planning. "She was the catalyst to get this pushed over the goal line," McGuire stresses. She's now the fund's president.
UDC's goal is to expand its US holdings to $2 billion by 2010. McGuire's fast-paced plan calls for four closings per month to meet its goal. "The Europeans are very interested in putting money into the US due to the exchange rate," McGuire says, adding an expansion is certainly possible if the right deals come along.
The $1-billion pool can be used for construction and permanent financing. "The credit tightening by American institutions is presenting us with a distinct advantage," Derck Jan Smits, general manager of North America for SNS Property Finance International, says in a press release. "The funding and closing of our deals is from Dutch banks. We are able to find and fund deals quickly."
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