Chasin says that the quick sale was remarkable in light of the amount of due diligence required and the complexity of the transaction, which involved two Goodyear stores that were not yet completed, five separate loans on five separate properties in three different states with two different banks, five different consents from the banks, and development agreements that the seller and the buyer had to agree upon to ensure that the unfinished buildings would be completed according to specifications. The sale had to close in seven days to meet a 1031 deadline.
The buyer assumed the mortgages on the properties via a wrap-around structure, and Pegasus is working with Verona Capital Markets Inc., a Los Angeles based real estate capital markets and advisory firm with whom it has a strategic relationship, to refinance the portfolio with long term, fixed-rate financing.
Chasin says that the portfolio's infill locations, strong demographics, high-quality new construction, and long term NNN leases enabled the buyer to fulfill its investment objectives while satisfying a portion of a 1031 exchange for a mix of multifamily and multi-tenant commercial properties that it sold. The Goodyear portfolio was owned and developed by a private company based in Columbia, SC, that was represented by Tony Alanis and Kevin Shelburn of Netlease Real Properties in San Diego. It is located throughout high-income suburban neighborhoods in Raleigh, NC, Columbia, SC, and Atlanta.
Chasin says that a key to the quick close was that, "This was a deal in which every party involved had a vested interest in getting it done," including the banks, which "were very motivated to get new equity into the deal," he says.
The transaction illustrates that single-tenant net-leased properties represent a safe haven for investors looking to preserve capital and achieve stable cash flow streams, Chasin says. He points out that investors who bought triple-net properties leased to strong tenants have been better insulated from the upward direction of cap rates, and he cites a report by CB Richard Ellis Group that shows US retail cap rates have risen to their highest levels since the first quarter of 2003. "When retail cap rates started rising in 2007, many investors engaged in a 'flight to quality' strategy which has helped preserve valuation for well located assets leased to credit tenants―which this portfolio is a prime example of," Chasin adds.
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