Investor Buying Opportunity Ahead
As interest rates continue to climb, the cost of capital for owner occupants is getting pushed higher. To cope with the increased cost, owners are considering liquidation as one option to generate funds for operating expenses, company expansion or retiring debt. This presents an excellent sale-leaseback opportunity for investors hungry to buy real estate that comes with a long-term tenant in place.
Interest rates have risen more than 100 basis points in the last few months, and the general consensus is that rates will continue to rise. As interest rates increase, a larger number of office, industrial and retail buildings are projected to be marketed for sale. For example, Transwestern client Flager Construction Equipment recently closed a $17 million sale-leaseback of its industrial portfolio in Florida. Flager, a Volvo heavy equipment dealer, needed to free up capital to purchase extra equipment and increase sales. The sale-leaseback unlocked the full value of Flagler's real estate assets, allowing the company to invest its capital where it was needed most. The transaction also provided Flagler with an additional $1.5 million in construction funding to expand and improve one of its three facilities. Meanwhile, the buyer purchased three excellent properties and secured a 15-year lease with Flagler.
Additionally, the higher interest rates are expected to bring more net-lease properties to market as well. Read more on the topic in Transwestern's 4th quarter edition of Insights + Trends + Opportunities.
Transwestern's Chicago-based net-lease/sale-leaseback team of Marc Imrem and Andrew Watson have more than 24 years of experience. The duo has completed more than $500 million in net-lease sales in more than 150 transactions and covers markets in all 50 states. Imrem and Watson were the leading brokers on the Flagler transaction mentioned above.