Hanley Handles Break-Up Strategy for Sacramento-Area Center
By Dennis Kaiser
Hanley Investment Group Real Estate Advisors, a nationally recognized real estate brokerage and advisory firm specializing in retail property sales, recently completed the second transaction in the break-up sale strategy of the 99 Cents Only-anchored Zinfandel Crossings in the Sacramento metro area. Ed Hanley explains the strategy behind the multiple-step transaction, and some of the considerations involved in this type of deal in our latest 3 CRE Q&A.
Q: How is this break-up strategy a good match for today’s investors and sellers? A: The break-up strategy provides an opportunity to maximize value for the seller through individual sales to private, non-institutional investors. In today’s market, deals in the price range of $2 million to $5 million appeal to the largest buyer pool. Hanley Investment Group has been able to achieve cap rates approximately 100 basis points lower in break-up sale strategy executions, as compared to selling the property as a whole. We expect the demand for both single-tenant and multi-tenant pad buildings in major markets throughout the U.S. to continue to be strong, especially from the private investment community.
Q: What are some of the opportunities and challenges as compared to more traditional transactions? A: There are many options and considerations including whether or not the property is already parcelized, and if it is parcelized, will this meet the requirements of the targeted buyers. Depending on the property strengths and sales strategy, different parcels might appeal to different types of buyers. For example, one multi-tenant retail pad building might have a large vacancy that would be perfect for a value-add investor/developer that wants to reposition a major tenant space. A new 20-year absolute triple-net lease with a corporate guarantee for a national credit tenant occupying a single-tenant retail pad building at a hard corner intersection might appeal to an investor that is looking for management-free, reliable cash flow. The challenge for some property owners is that they may not have the time to parcelize their property, or the ability to sell their shopping center in pieces due to partnership owner agreements.
Q: What are some examples of deals that Hanley Investment Group has been involved in? A: Recently, Hanley Investment Group closed escrow on a two-tenant retail pad building occupied by Chipotle and Firehouse Crawfish restaurants, the second pad sale in the break-up play at Zinfandel Crossings located in the Sacramento metro area. The previous sale was the 99 Cents Only store and inline shop buildings totaling 54,004 square feet, which offered a great value-add opportunity. Hanley Investment Group is now marketing a five-tenant, 100% occupied retail building at the center.
Other break-up plays in process include Lake Elsinore Marketplace, a Costco-anchored shopping center in Lake Elsinore, CA; Derby Marketplace, a Target and Dillons-anchored center in Derby, KS.; Eastvale Marketplace, a Smart & Final-anchored center in Eastvale, CA.; and Highland Village, a Sprouts-anchored center in Fontana.
Last year, Hanley Investment Group completed sales of six separate pad buildings within Perris Marketplace, a Walmart-anchored shopping center in Perris, CA, which resulted in an improved value of approximately 100 basis points with an effective cap rate compared to selling the entire center as a whole.
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Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services.
In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company.
In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix.
Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator.
Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements.
Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.