Archives for March 2018

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Investors’ willingness to seek comparable investment opportunities in secondary or tertiary markets across the country to meet their investment requirements grew in 2017, HIG’s Ed Hanley tells GlobeSt.com.

The demand for well-located single-tenant triple-net leased investments leased to credit retailers and multi-tenant retail centers with internet-resistant credit tenants will remain strong. That is according to Hanley Investment Group Real Estate Advisors, a nationally-recognized real estate brokerage and advisory firm specializing in retail property sales. The Corona Del Mar, CA-based company recently revealed that it had closed out 2017 with total sales volume in excess of $562 million, which represents more than an 18% increase in the number of transactions over the previous year.
“2017 was one of the best years ever for Hanley Investment Group,” Ed Hanley, president of Hanley Investment Group, tells GlobeSt.com. “We closed deals in 25 different states in 2017, ranging from anchored shopping centers to multi-tenant retail strip centers and single-tenant properties. We worked with publicly-traded real estate investment trusts, family trusts, partnerships and private investors.”
And more than half of those closings were outside of California, he adds, which “speaks to investors willingness to seek comparable investment opportunities in secondary or tertiary markets across the country to meet their investment requirements as yields for high-quality, stabilized, internet-resistant single-tenant and multi-tenant retail in primary markets remain compressed.”
Some of the noteworthy deals include the sale of a rare fee-simple ground lease for 5.32 acres on South Lake Avenue in Pasadena, CA, in January. Hanley Investment Group sourced more than 20 qualified offers were procured for the Macy’s shadow-anchored property, and it closed within 30 days for a sale price of $15.13 million.
Hanley Investment Group also represented the buyer in an off-market transaction in the sale of the fee-simple land beneath the Newport Beach Tennis Club in September. The land consists of approximately 7.6 acres adjacent to Eastbluff Village Center, anchored by Ralphs Fresh Fare supermarket and CVS/pharmacy in Newport Beach, California.
Some of the significant multi-tenant highlighted deals include the sale of Arcadia Gateway Center, a 156,046-square-foot, mixed-use commercial center comprised of retail, medical and office buildings in Arcadia, CA, which sold for $62.1 million in January, representing a cap rate of 5.4, the lowest cap rate for any property of its kind in the State of California in 2017, according to CoStar.
In June, Hanley Investment Group represented both the buyer and seller in the sale of Oak Grove Crossing in Lake Elsinore, CA, a 22,577-square-foot shopping center shadow-anchored by Target, which sold for $11.6 million.
In July, Hanley Investment Group arranged the $28.6 million sale of Sierra Del Oro Towne Centre, a 110,004-square-foot Ralphs grocery-anchored shopping center in Corona, California. The buyer was Phillips Edison & Company of Cincinnati, Ohio. Also, Hanley Investment Group served as an advisor in bringing the buyer and seller together in the sale of five shopping centers owned by Phillips Edison & Company, one of the nation’s largest owners and managers of grocery-anchored shopping centers. The buyer was a private commercial real estate investment company based in Beaumont, Texas. The retail properties, which were located in either a secondary or tertiary market, totaled 583,337 square feet. The properties that traded were Quincy Plaza in Ottumwa, Iowa; Kokomo Plaza in Kokomo, Indiana; Catawba Village in Newton, North Carolina; Lakeside Shopping Center in Anderson, South Carolina; and Louisa Plaza in Louisa, Kentucky.
In addition to grocery/drug-anchored shopping centers and multi-tenant retail strip centers, Hanley Investment Group sold numerous single-tenant properties located throughout the US. In January, Hanley Investment Group, in association with Citi Property Services Inc. of Santa Clarita, CA, completed the sale of a new construction single-tenant Starbucks with a drive-thru located in Redlands, California. The purchase price of $2.6 million represented a cap rate of 3.76%. According to CoStar, this sale achieved multiple records—one of the lowest cap rates nationwide for a single-tenant Starbucks and one of the lowest cap rates for a fee-simple Starbucks in Southern California.
In July, Hanley Investment Group completed the sale of a rare Walgreens flagship store in Honolulu, Hawaii, for $42.25M ($1,172 psf), one of the highest prices paid for a Walgreens store in the retailer’s history. The buyer was a Korean investment firm in Los Angeles. Hanley Investment Group represented the seller, along with Eastdil Secured LLC. Built in 2015, Walgreens occupies the 36,058-square-foot freestanding building under a long-term lease.
Another record-low cap rate was the sale of a brand-new single-tenant McDonald’s ground lease in the City of Azusa, California, in October. The purchase price was $3.54 million, which represented a cap rate of 3.25 percent, the lowest recorded closing cap rate for a new construction McDonald’s in the U.S. on record, according to CoStar. Hanley Investment Group represented the seller, along with SRS’ National Net Lease Group.
In September, Hanley Investment Real Estate Advisors completed the sale of a single-tenant net-leased retail property occupied by Circle K at 5850 W. Indian School Road in Phoenix, AZ. The purchase price was $1.3 million, which represented a cap rate of 4.62%, the lowest recorded closing cap for a Circle K in the US in 2017, according to CoStar.
Many of Hanley Investment Group transactions set or made the market and impacted future pricing for other properties. “These achievements were the result of careful evaluation of the asset, helping sellers to maximize the asset’s value, overcoming buyer objections to any tenant lease issues; and having a comprehensive database of investors and the relationships to source buyers for the properties,” Hanley tells GlobeSt.com. “Rising interest rates are at the top of everyone’s mind and continue to have a direct impact on investors’ purchasing decisions,” explains Hanley Investment group executive VP Bill Asher. “As low as 2% in September 2017, the 10-Year Treasury yield has climbed as much as almost 3% in 2018, trading at a four-year high. If interest rates continue to go up, it will certainly continue to affect retail transaction velocity this year specifically for properties priced $10 million and up that are traditionally dependent upon financing. Single-tenant net-leased retail sales priced $5 million and less will continue to experience consistent sales due to a significant number of buyers transacting all-cash.”
Asher reports that according to CoStar, the average cap rate and total number of transactions for all retail sales in California (priced over $1 million) were almost identical year-over-year 2016-2017. The average cap rate for both years was the same at 5.56%, while the total number of sales was 1,019 in 2016 compared to 1,039 in 2017. The major difference was total sales volume, which declined $1.1 billion in 2017 ($6.54 billion) from 2016’s total of approx. $7.63 billion.
“2017 saw a larger number of community and power shopping centers not selling or seeing pricing adjustments due to store closures and consolidation, as well as the continued impact of online retailing and Amazon,” Asher adds. Retailers will need to adapt to an ever-changing new normal. “Daily-needs retailers including a focus on food and service-related retail will continue to expand and thrive in the near future,” Hanley notes. “Grocery-anchored shopping centers with reported successful sales and a complementary mix of internet-resistant retailers will continue to be in high demand and command top of the market pricing.” According to Hanley, record pricing for unanchored multi-tenant retail has plateaued. “Even with the recent spike in interest rates and reportedly, more hikes to come, investor demand for new, well-located single-tenant triple-net leased investments leased to credit retailers will remain strong. Buyers will continue to pay premiums for these types of properties seeking long-term stable cash flow, with relatively low risk and little to no maintenance.”
What does Hanley see for 2018? “If January’s recent activity of closed transactions, upcoming new listings, and a multitude of buyer requirements are any indication to how the rest of the year will go, we anticipate it’s going to be another busy year.”
By: Natalie Dolce (Globe St)
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As skilled workers weigh employer reputations and workplace experiences when making job choices, companies are working harder to cultivate…

As skilled workers weigh employer reputations and workplace experiences when making job choices, companies are working harder to cultivate their brand as a recruiting and talent-retention tool. Occupancy cost is the second-largest expense after payroll at most firms. Savvy employers—not just tech and creative firms—can draw double duty from their real estateby molding the workplace into an extension of their culture.
Transwestern vice presidents Sara Maffey Duncan and Randy Beavers focus on the human side of real estate when advising clients on site selection and placement. Beyond the typical “space and place” requirements of their clients seeking an office location, the duo helps these companies visualize, assess, and secure workplaces that motivate and encourage productivity and happiness.
According to Duncan and Beavers, the key is to look beyond the office layout. They help companies identify the elements of their corporate culture to develop a unique setting that speaks to employees and potential hires to ultimately: (1) create social cohesion; (2) support efficient output; and (3) promote stickiness for the desired labor set.
“As unemployment remains low in Atlanta and a millennial workforce with different expectations and work styles from preceding generations grows, companies must develop corporate brands to aid in the recruitment and retention of modern skilled workers,” Duncan tells GlobeSt.com. “A company’s real estate from macro-level location decisions to workplace design is now a statement of its culture and major tool in attracting the specific talent they seek.”
Payroll is generally a company’s largest financial expense, followed by real estate, Duncan says. The opportunity cost of unsuccessfully recruiting and retaining a productive and happy skilled workforce can be equally as expensive. Therefore, she concludes, Chief Human Resource Officers are more often included in real estate strategy discussions and firms are placing more value on the lifestyle their neighborhood and workplace can support.
“We are seeing the need to address workplace branding at the very beginning of real estateadvisory when a company can envision its ideal workplace environment without the constraints of a particular city, submarket, or floorplate,” Beavers says. “This involves looking beyond the physical office layout, identifying the cultural elements and characteristics that create social cohesion, support productivity, and promote stickiness for the desired employees.
Beaver’s conclusion: Assisting tenants in putting this level of thought into their workplace design and strategy is becoming non-negotiable. By deeply understanding clients’ cultural and operational needs, real estate advisors can provide valuable business solutions through real estate.
By: Jennifer Leclaire (Globe St)
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CORRECTION: A headline in Tuesday’s Journal incorrectly said the Supreme Court sent a New Mexico water case to arbitration. The court remanded the case to a so-called “special master” who will oversee ongoing arguments in the case.
The U.S. Supreme Court ruled unanimously Monday that the federal government can intervene in a water case pitting Texas against New Mexico and Colorado, meaning the case will be sent back to a “special master” to arbitrate the dispute.
The opinion, written by Justice Neil Gorsuch, said the federal government must be allowed to meet its federal water obligations – including an international agreement with Mexico – and actions that would go against the decades-old Rio Grande Compact would hinder that duty. The 1938 Rio Grande Compact governs the distribution of water in the Rio Grande Basin.
Gorsuch said “a breach of the Compact could jeopardize the federal government’s ability to satisfy its treaty obligations to Mexico.”
Texas sued New Mexico in 2014, claiming that New Mexico farmers and pecan growers illegally pump groundwater from below Elephant Butte Dam that would otherwise flow to El Paso and West Texas. New Mexico claims that its water obligations to Texas are measured at the dam.
New Mexico had filed a motion to dismiss Texas’ lawsuit, but in July a special master appointed by the Supreme Court to analyze the case recommended the court reject that motion and allow the case to proceed. The complicated case could set a standard for the role the federal government will play in settling water rights disputes between states in the years ahead.
Reed D. Benson, chairman of the Natural Resources & Environmental Law Program at the University of New Mexico, said the Supreme Court ruling was not unexpected.
“This decision is a preliminary ruling on the kinds of arguments the U.S. can make in this case, and the result was what most people expected, especially after the oral argument,” Benson said. “It’s a narrowly written opinion that doesn’t change the course of the lawsuit. But the outcome is not encouraging for New Mexico, in part because it allows the U.S. to reinforce all of Texas’ compact arguments.”
In issuing its ruling, the court noted that New Mexico “has conceded in pleadings and at oral argument that the United States plays an integral role in the Compact’s operation.”
Marcus J. Rael Jr., a private attorney working under contract for the New Mexico Attorney General’s Office, represented the state before the court Monday. Rael told the justices in January that under his view of the law, the federal government can pursue legal remedies under an earlier treaty but not under the 1939 compact apportioning the water among Texas, New Mexico and Colorado.
James Hallinan, a spokesman for New Mexico Attorney General Hector Balderas, noted that the Texas lawsuit was filed during the tenure of then-Attorney General Gary King, and he said Balderas is looking out for New Mexico’s interests and “will continue to vigorously defend the rights of New Mexico water users and work with all parties to seek a fair resolution for New Mexicans.”
“Today’s ruling was a preliminary matter clarifying the United States’ role in the case,” Hallinan added.
During oral arguments before the court in January, justices seemed to signal their thoughts on the matter.
“It seemed to me quite simple,” Justice Steven Breyer said during the arguments. “The Constitution foresees that they (the federal government) can intervene where there’s an interest. They have several interests. End of case, unless there is something that I don’t see.”
In 2008, water agencies in Texas and New Mexico, along with the federal government, reached a deal to share lower Rio Grande water. The parties hoped negotiating a Rio Grande operating agreement among themselves would head off an interstate lawsuit by Texas. But in 2011, King’s office filed suit to invalidate the interstate water operating agreement, charging that it gave away too much of New Mexico’s water to Texas.
Texas, in its initial Supreme Court filing, cited King’s lawsuit, arguing that it advanced “novel interpretations of the Rio Grande Compact” and that the Supreme Court’s help was needed to untangle the disagreement.
By: Michael Coleman (ABQ Journal)
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