Thomas Company Arranges Sale of Research and Development Facility
Thomas Company announces the sale of a free-standing research and development facility. This mission critical property is located on over 18 acres of land in Middletown, Ohio. It is fully leased to AK Steel Holding Corporation (NYSE:AKS). The property was sold with a new 18-year, triple-net lease in place, incorporating 2% annual rent increases and multiple renewal options.
The 135,433 square foot, built-to-suit asset features a modern office space, state of the art laboratories, steel manufacturing facilities, and a 10,000 square foot conference center built to enhance customer technical service and host symposiums.
AK Steel is a world leader in the production of flat‐rolled carbon, stainless and electrical steel products. AK Steel’s heritage spans more than one hundred years, and today, the company operates eight steel plants, two coke plants and two tube manufacturing plants across six states. They employ nearly eight thousand people.
Thomas Company is proud to have negotiated and closed this transaction. With more than $5.6 billion worth of single-tenant transactions executed successfully, we continue to deliver superior results for our clients.
Real Estate Forum 2015 Top Retail Brokers
Jeffrey Thomas is recognized as one of Real Estate Forum’s 2015 Top Retail Brokers.
Real Estate Forum’s annual list is a ranking of the nation’s most prolific retail investment sales professionals. From July 2014 through June 2015, Jeffrey Thomas completed 120 sales at a total dollar value of $471,752,644 and 1,584,952 square feet.
Jeffrey Thomas is the Managing Director of Thomas Company, an investment brokerage focused on national, single tenant net leased properties.
Read more at Real Estate Forum »
Thomas Company Q1 Results
Thomas Company announces our 2015 first quarter results, with 72 properties sold for a total of $295 million.
Thomas Company provides single tenant, net leased investment brokerage and capital markets advisory nationwide.
With over $5 billion worth of single-tenant transactions successfully executed, we have delivered superior results for our clients.
Our clients include public and private REITs, equity funds, developers, private and institutional investors, corporations (publicly and privately held), private equity firms, investment banks, family offices and high-net-worth investors.
Thomas Company has developed an international distribution network of real estate investors and advisors that include active professionals across 50 states and 5 continents.
Net Lease Debt Update
The market seems to have found the perfect balance between analyzing risk and making attractive finance offers on STNL credit/non-credit retail assets. CMBS has by far been the most creative capital outlet, offering terms like 10 year I/O and ARD (Anticipated Repayment Date) structures providing the equivalent of turnkey workouts for investors. Of course leverage and remaining lease terms play a significant role in NNN financing. Lenders will look at dark values to determine where they want to be at the end of the balloon date and/or lease terms—this is where the art of underwriting comes to the forefront.
Banks are following the CMBS lead with their own I/O offerings, providing a more streamlined process with flexible prepayment schedules and fewer costs. The underwriting is a bit more conservative since these loans will remain on their books, and banks face many more challenges when one of their loans has a dark tenant. These institutions remain a very viable source for STNL.
Despite being full recourse lenders, credit unions are also winning their fair share of business by offering very flexible prepayment penalties (typically none), long amortizations, and a much simpler process.
Life insurance lenders are extremely focused on the location of the STNL assets they finance, but will more than likely win the business once they get their sites on a subject they want to finance. Life companies are pretty much full of Walgreen’s and CVS properties, with the occasional small bucket of fund availability opening up—the trick is staying on top of them in order to catch these periodic opportunities. They typically have room for the other credit rated tenants in the marketplace.
Non-credit rated STNL assets are about finding out as much about the tenant as possible and underwriting the loan request based on the merits of the real estate. These loans tend to be more conservative and can require some form of guarantee, but all lender types are playing in this arena and winning business at varying levels.
In all, there are very aggressive adjustable, 3, 5, 7, 10 and longer term fixed rates available for these assets across a large swath of capital providers. By way of example, a WAG portfolio was recently funded with a 10-year I/O and 16-year lease remainder average at 70% LTV.
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NNN Equity Update
The fluctuation of interest rates during the third quarter and over the past 18 months have done nothing to dampen the market for net leased investments. We have noticed this across all asset types within the sector. Turning our attention towards the monthly data we collect on the market for net leased Walgreens properties, it suggests that we may be in for more of the same. Here’s how the numbers are stacking up for long-term net leased Walgreens properties (20+ years of remaining term) as we begin to wrap up 2014:
Nearly 200bps of cap rate compression
The average asking cap rate for Walgreens properties continues to push to new lows. The average asking cap rate broke through historically low levels in 2013 and we continue to see a new low set monthly. The current average asking cap rate is 5.33%, down 23 basis points in the last 12 months and 19 basis points year-to-date. For historical perspective, the average asking cap rate peaked in February 2010 at 7.27%.
Low inventory
There are currently 27 Walgreen pharmacies on the market with more than 20 years of lease term remaining. Inventory dropped by 11 units from 38 properties last month, as market absorption outpaced new availabilities. This was a larger drop than usual, and may indicate an imbalance that could drive cap rates lower in the months ahead. We generally consider the market to be in equilibrium when there are 25 to 50 Walgreens properties available. The inventory levels have consistently remained in this range since early 2012. For comparison, the inventory of available Walgreens properties peaked at 230 in late 2008 during the recession.
Narrowing spread, but room for compression
The spread between the average asking cap rate for Walgreens properties and the 10-year treasury continues to remain near 300bps, which is still well wide of the pre-recession levels. Prior to the recession, this spread was near 150bps. The spread widened rapidly to 500bps during the market’s doldrums as investors became more adverse to the perceived additional risk of real estate. While the market may never tolerate the pre-recession spread of only 150bps (equivalent of a 3.84% cap rate today), we think the spread may narrow beyond today’s historically wide spread of 300bps.
The ability to accept a narrower spread has been demonstrated over the past 18 months as market activity remained strong during several abrupt increases in interest rates. During this time, the 10-year treasury yield has climbed approximately 40 basis points while the average asking cap rate has declined more than 60 basis points.
In short, we see demand exceeding supply for long-term net leased assets with strong credit. Given historically low levels of supply and a market which appears willing to accept decreasing spreads, we would not be surprised to see some continued cap rate compression going forward.
Net Lease Market Brief
We recently completed our monthly survey of available, long-term net leased Walgreens properties and wanted to share our findings. The average asking cap rate has dropped to 5.49%, the first time that the average asking cap rate has been below 5.50%. This marks a nearly 180 basis-point drop since the average asking cap rate peaked at 7.27% in early 2010. The current number of available properties on the market stands at 46, which is an increase of 8 properties from the month before. A rapid increase of inventory is often a leading indicator of a weakening market, but the large increase this month is due to an unusually high number of assets coming to market, and not a decline in sales.
Net leased Walgreens drugstores are a bellwether of the net leased market due to the strength of Walgreens credit and the favorable lease terms. Additionally, an average asset size of $8.5M puts them in reach of private investors, making them a popular acquisition target for investors looking to satisfy a 1031 exchange.
Thomas Company provides single tenant, net leased investment brokerage and capital markets advisory nationwide. The firm serves individual and institutional investors, private equity funds, REITs, and developers throughout the United States, helping them execute transactions in the complex and growing single tenant, net leased marketplace.
Realshare Net Lease Conference Series
RealShare Net Lease has some big news. Net Lease leader Jeffrey S. Thomas, founder of the Thomas Company and one of the most respected minds in net lease, has joined the “Property Sectors in Focus” panel. Since 1992, Mr. Thomas has completed over $4.5 billion in investment transactions, representing 550 properties sold. In 2013, he founded Thomas Company after senior management positions at HFF and CBRE. Mr. Thomas will bring his recognized expertise to our must-attend session on net lease investment across the main property “food groups.”
Read more at GlobeSt.com »
Daily Journal of Commerce Thomas Company Profile
On pace to close about $200 million of net leased investment sales in the fourth quarter of 2013, comprised of more than 700,000 square feet of office space and several single-tenant retail properties, Thomas Co. just opened its headquarters in Seattle. Company founder and net lease broker Jeffrey Thomas added Adam Christoffersen to his team, which focuses on selling single-tenant office, industrial and retail buildings. Thomas spoke with the DJC about his new company and his thoughts on Seattle.
Read more at DJC.com »
Thomas Company Announces Hire of Adam Christofferson - Yahoo Finance
Thomas Company, a privately held commercial real estate brokerage that provides single tenant, net leased investment brokerage and capital markets advisory nationwide, today announced the opening of its Seattle office and that net leased veteran Adam Christoffersen has joined the firm.
Thomas Company Hires Adam Christofferson - Globe St.
The Newport Beach, CA-based firm opens an office here in Seattle and adds net leased expert Christoffersen to the firm. Thomas Co.’s Seattle office will serve clients nationally and also provide Seattle-area owners of net leased real estate a boutique brokerage firm with the ability to direct national capital to Seattle-area assets. Additionally, the firm’s expertise in sale-leaseback transactions will provide a national platform for local companies looking to unlock under-utilized capital by selling and leasing back company-owned real estate. Christoffersen is an analyst who in his decade-long career has overseen underwriting of more than $5.2-billion worth of net leased assets across a variety of property types.
Read more at GlobeSt.com »