A Word From Peter Colvin-Nation NNN Team Leader For Sperry Van Ness

2010 Sperry Van Ness Year End Summary

Single Tenant Investments

By Peter Colvin

National Director of Single Tenant Investments

Sperry Van Ness

Many owners of strip centers and office buildings got their first taste of single tenant investments in 2010, and they liked it…a lot. No vacancies, little or no management and no phone calls from tenants that could no pay their rent. What a refreshing change!

As a result, many buyers focused on finding and purchasing quality single tenant assets, leased long term to credit companies, with little or no landlord responsibilities. This shift increased the demand and the supply of good properties was gobbled up quickly. Prices increased as cap rates lowered across the board, rivaling 2007 rates. Low interest fueled the demand.

For investors in the $4,000,000 + range, the stars of the show were Walgreen’s and CVS. Cap rates dropped nearly ½ point in the last quarter as REITS, trusts and families outbid each other to win the assets. The average drug store cap rate was approx 7.7% at year end. Sperry Van Ness had several successful drug store transactions. Some listings drew as many as 10 offers, driving up the price for our listing clients. One offer in Miami secured a purchase price $500,000 higher than the other nine offers on the same property. We found the best buyer.

In the $2-$4M range, restaurants like Applebee’s and Macaroni Grill were gobbled up. Over 100 Applebee’s were bought by investors as the Dine Equities sale/leaseback of Applebee’s and the Mac Acquisitions LLC sale/leaseback of Macaroni Grill units were placed with individual investors. Cap rates dropped nearly ½ point in the last quarter as the supply tightened. Average cap rates ended the year at approx 8.25%. Sperry Van Ness sold a large share of these properties.

In the $1-$2M range (the most active price range) bank deals, especially ground leases, were sought after. Advance Auto and O’Reilly’s topped the discount auto parts arena. Small portfolios of Burger Kings, Pizza Huts and other brand name QSR’s were sold one-off as investors hunted for well located sites leased to popular brands. Average cap rates ended the year at approx 7.7%. Sperry Van Ness advisors were major players in this arena, selling numerous portfolios.

In the under $1M range, dollar stores became more and more attractive to investors seeking strong credit at an affordable price point. Family Dollar and Dollar General were the most active in that niche. Dollar General adjusted to investors’ needs and introduced the Triple Net 15 year lease. This brought first time dollar store buyers off the sidelines. Average cap rates were higher on dollar stores than other types, mainly due to many being in smaller town locations with less land value. The cap rates ended 2010 at 9.2%. Sperry Van Ness was a market dominator in Dollar Stores.

What to expect in 2011: The key word will be “Sale/Leaseback”. The pent-up demand for growth and remodels by companies and growing multi-unit franchisees is strong. Instead of taking on more debt, many will fund their growth and remodels by using their real estate equity, especially since it has increased due to rising values. Many institutional buyers that would not buy franchise backed credit in the past are now more than happy to do so.

Sperry Van Ness has anticipated this explosion and has formed “Easy Leasebacks”. (www.EasyLeasebacks.com) This innovative group of single tenant specialists is matching portfolios of single tenant properties with the best buyers. It is helping growing companies sell their assets in the fastest, most affordable and confidential way possible to fund their growth without taking on additional debt. Easy Leasebacks is having great results.

Reverse sale/leasebacks caught on as fast growing trend in 2010. Sperry Van Ness Advisors helped many developers build new single tenant properties by bringing in investors to buy the land and fund the construction. This kept things going while banks stopped lending or required too much cash from the developer. This trend should continue for a long time. Investors get a little better cap rate as a bonus for coming in early, so it is a win-win for both investors and builder/developers.

Dollar stores should continue to sell briskly as more and more people make a decision to cash in their low yielding bonds and CD’s for a long term 10% + cash on cash return. Investors continue to seek bank and fast food ground leases, well located restaurants, discount auto parts and drug stores. 2011 should be a continued healthy market for high quality, well located single tenant properties. Banks seem to agree and got more aggressive in lending on these in the 4^th quarter of 2010.

Sperry Van Ness gained a much larger market share of Single Tenant transactions in 2010 as sellers realized that to get the best offers, a property needs to get maximum exposure. The buy pool changes often, with new investors coming into the market every day. The platform of exposing properties through new social media networking and unselfishly sharing commissions with the entire brokerage community has worked very well. It helped investors to find their deals and sellers to meet their pricing goals.

Some of the top single tenant specialists from Marcus and Milichap and other national companies joined Sperry Van Ness in 2010 and enjoyed great success in their new-found sharing and team support. Many of the 2010 transactions involved multiple advisors teaming up for the greater good.

As a single tenant specialist and leader of a fantastic team of professionals that put their clients’ needs ahead of their own, I look forward to another great year in 2011!

Peter

Peter Colvin

National Director of Single Tenant Investments

Sperry Van Ness

Tiesta Tea gets Launched!

Dan Klein, Bobby Moynehan and Patrick Tannous of Tiesta Tea are taking the tea industry by storm. Tiesta Tea strives to provide the highest quality custom blended teas in the world, all of which are scientifically formulated to provide a specific health or mood result. The idea for the company started during a study abroad trip to Prague. One night when wandering the streets of Prague, they stumbled upon a traditional Czech tea house and ordered a famous fruit tea called Granny's Garden and were impressed by its full flavor and taste. This experience helped them realized how important coffee and tea shops were to the fabric of European society. They asked why not the U.S? Inspired they returned home to found Tiesta Tea and today are striving to reinvent the world of tea, with style and taste. They first received recognition for their unique company when they enter the ILLINOIS LAUNCH competition at the University of Illinois's Academy of Entrepreneurship. After a successful introduction of their concept people started to get excited! They received recognition from successful business people who then in turn helped nurture the fledgling company. This was one of my most favorite interviews in recent memory. To watch the episode in its entirety CLICK HERE

Effingham's Arts Connection

Effingham is amazing community. When a group of local businessmen decided that the city would benefit by having an arts and performance center they raised the money and built one! Later when the economy and other factors threatened to close the doors the local community stepped up and made the arts center public to ensure is long term feasibility. In this interview I speak with Janie Oldfield, director of the arts center.

Janie came to Effingham, IL in January 2009 to direct the activities of The Rosebud Theatre. Today she is Executive Director of the Arts Connection of Central Illinois, operator of the not-for-profit Effingham Performance Center. Her career spans more than three decades and includes three + years as Director of Manship Theatre in Baton Rouge, LA; seventeen years, including five years as Director of Performing Arts, at the McAninch Arts Center at College of Du Page, a suburban Chicago public community college; five years coordinating arts and lectures programs at Fermi National Accelerator Laboratory and four years in student activities programming at Northern Illinois and Illinois State Universities. She earned a Bachelor’s degree at De Pauw University in Greencastle, IN and a Masters Degree at the University of Missouri-Columbia. This is truly an amazing city and the story of the arts center is more proof that Effingham is a can do community. To watch the entire interview with Janie Oldfield CLICK HERE.

Epi-Works, A Home Grown Start Up

EpiWorks is the exclusive producer of several advanced layers and processes that are tailored for optimal performance in particular applications. EpiWorks products are geared toward enabling higher performance integrated circuits (ICs) for the communications industry, leading to cell phones with longer battery life and high-speed Internet access for the home and office.

But EpiWorks is more than a manufacturer of high-quality epitaxial wafers; it's a next-generation epitaxial design and manufacturing company that brings expertise with epitaxy, device design, and manufacturing under one roof. Working closely with its customers, EpiWorks develops the semiconductor solutions that keep you a generation ahead.

The wireless and wireline communications industry has an insatiable hunger for bandwidth.

Epitaxial devices are the key to feeding that hunger. EpiWorks pushes current materials and device technology to the highest performance limits and is at the forefront in developing the breakthrough solutions that will drive the compound semiconductor industry to new heights.

Quesnell J. Hartmann, Ph.D.– Co-Founder, CEO, Director. Co-founded EpiWorks in 1997. Has led the company through the historical telecom downturn into a high growth, prof­itable enterprise.

David A. Ahmari, Ph.D.–Co­Founder, EVP & Director. Co­founded EpiWorks in 1997.

To watch the entire interview with the Epi-Works founders CLICK HERE