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Gramercy Property Trust (GPT) puts another $82M to work, closing on 4 acquisitions. Among the...

Gramercy Property Trust (GPT) puts another $82M to work, closing on 4 acquisitions. Among the buys is a wholesale automotive facility near Dallas for $58.5M with an initial cap rate of 8.4%, and an industrial freezer facility near Philadelphia for $11.8M with an initial cap rate of 6.2%. The company's Q2 investments had an average lease term of 15.1 years and average cap rate of 8%. (PR)
Comments (12)
  • joeg1969
    , contributor
    Comments (438) | Send Message
     
    slowely but surely im smelling Divi!
    1 Jul 2013, 09:03 AM Reply Like
  • Steven Reiman
    , contributor
    Comments (348) | Send Message
     
    6.2% cap rate? Hopefully there is more to that one than meets the eye, that seems very low, especially since it is a small purchase.
    1 Jul 2013, 09:23 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2826) | Send Message
     
    "The building is 100% leased through May 2028 to one the largest wholesale distributors of natural, organic and specialty foods in North America. Year 1 net operating income is approximately $736,000 (6.2% initial cap rate), with fixed annual rent escalations throughout the lease term."

     

    I'm guessing that the rent escalations are generous to the landlord, and that explains the low cap rate. You're right though, 6.2% is awful low for warehouse space in south Jersey, so there's got to be something else going on. If its not a favorable lease, maybe excess land, or some other positive that justifies that cap rate.
    1 Jul 2013, 10:01 AM Reply Like
  • Steven Reiman
    , contributor
    Comments (348) | Send Message
     
    Mike,

     

    Appreciate your thoughts, have an email out to GPT, will let you know if I hear anything back.

     

    Steve
    1 Jul 2013, 10:42 AM Reply Like
  • Steven Reiman
    , contributor
    Comments (348) | Send Message
     
    "The facility was acquired for approximately $58.5 million including the assumption of a $26.3 million, fully-amortizing first mortgage that is co-terminus with the lease. The loan has a fixed rate of 6.95%"

     

    Loan seems expensive as well?
    1 Jul 2013, 10:58 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2826) | Send Message
     
    I'm less versed in loans than property valuation, but yes, I would have expected commercial mortgage rates to be closer to 5.5% than to 7%.
    1 Jul 2013, 12:04 PM Reply Like
  • Johnson H
    , contributor
    Comments (9) | Send Message
     
    "The industrial freezer/cooler facility is a newly constructed 70,000 square facility located in Logan Township, New Jersey (Philadelphia MSA), approximately eight miles from the New Jersey Turnpike and I-295 interchange. The building is 100% leased through May 2028 to one the largest wholesale distributors of natural, organic and specialty foods in North America. Year 1 net operating income is approximately $736,000 (6.2% initial cap rate), with fixed annual rent escalations throughout the lease term. The facility was acquired in an all-cash transaction for a purchase price of approximately $11.8 million."

     

    Brand new building means low maintenance and maybe rent escalations will be high. Cash sale means they can cash out refi for good terms and leverage even more.

     

    For the Dallas property, they can assume the higher rate loan for the purchase transaction and will most likely refinance it as soon as possible.

     

    Very good news for GPT, glad to be long in it.
    1 Jul 2013, 01:40 PM Reply Like
  • Steven Reiman
    , contributor
    Comments (348) | Send Message
     
    Jojo,

     

    GPT is a triple net lessor-I don't believe they have to pay for any of the maintenance as that is all supposed to be done by the tenant. I would think a brand new building would be able to attract higher cap rates.

     

    Management knows what they are doing though so I'm confident in the end result.

     

    Steve
    1 Jul 2013, 02:25 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2826) | Send Message
     
    From IRR, the top of page 9, going in cap rates for Phili Industrial space 6.25%. I guess there's a real demand for space down there.

     

    http://bit.ly/11V58aI
    1 Jul 2013, 04:33 PM Reply Like
  • Steven Reiman
    , contributor
    Comments (348) | Send Message
     
    A devil's advocate response would be why invest in Philly real estate then, especially when there is apparently a lot of opportunity in more economically vibrant areas of the country such as Texas?

     

    However, I'm confident that there is more to this deal than meets the eye. We should get more detail on the business update next month.
    1 Jul 2013, 08:31 PM Reply Like
  • Johnson H
    , contributor
    Comments (9) | Send Message
     
    Hi Steven,

     

    I agree its a NNN lease and its to the benefit of the lessor that the building is new with low maintenance. Hopefully this was factored into the the rent escalations. I don't mind the lower cap rate as it is prime real estate with a 15 year lease, that is as stable as it gets.
    3 Jul 2013, 12:02 PM Reply Like
  • Wilson Wang
    , contributor
    Comments (909) | Send Message
     
    I'm extremely impressed with the way Gordon and his team have gone about acquiring real estate properties at attractive cap rates. I think the cash flow is getting there and a few more acquisitions should be suffice for them to start paying out that nice dividend.
    1 Jul 2013, 07:54 PM Reply Like
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