Attendees
Author: Sarah
BACREN Houston Chapter June 16, 2022 Meeting
Speaker: Staci A. Griffin, Senior Attorney, MURRAY LOBB ATTORNEYS
Colliers Sells Net Leased Torchy’s Tacos in Boardwalk at Towne Lake in Cypress, TX
Torchy’s Tacos property in the Boardwalk at Towne Lake located at 9975 Barker Cypress Road in Cypress, Texas. The buyer, Melcher Investments, represented themselves in the acquisition as part of a 1031 Exchange. Todd Moore and Connor Duffy of Colliers represented the seller, CC Boardwalk I, L.P., in the transaction.
“This was an excellent transaction for both parties. This unique location at the Boardwalk is one not easily replicated. The Boardwalk development sees tremendous foot and vehicle traffic, and it’s not surprising that this is a top-performing location,” said Todd Moore, Principal of Colliers.
Boardwalk at Towne Lake is situated just north of Tuckerton Road along Barker Cypress Road. The Torchy’s Tacos retail property sits along the lake near the first entrance of Boardwalk at Towne Lake within a short distance of other retailers including Ambriza, Coco’s Crepes and World of Beer. This top-performing location is one of Torchy’s Tacos corporate chain’s top 5.
The property is located in Houston’s Bridgeland retail submarket. The submarket contains 4.7 million square feet of retail space which is currently 96.6 percent occupied. 60,600 square feet of new retail delivered in the last 12 months and there is 42,000 square feet of retail space currently under construction in the submarket.
Boulder Group 2nd Quarter 2022 Net Lease Report
MARKET OVERVIEW
Cap rates in the single tenant net lease sector increased slightly or were unchanged in the second quarter of 2022. Following record low cap rate levels for all three asset classes in the first quarter of 2022, the increase in borrowing costs and the current inflationary environment were the main determining factors for the change in cap rates. Single tenant cap rates increased by 5, and 7 basis points for the retail and office categories respectively. Cap rates for single tenant industrial remained at the prior quarter’s level.
During the second quarter of 2022, the Federal Reserve announced two rate hikes. One in May for 50 basis points and another in June of 75 basis points – the Federal Reserve’s largest rate hike since 1994. Accordingly, for the first time since late 2018, the 10-year treasury yield surpassed 3.00%, peaking near 3.50% in mid-June. This correlated to higher borrowing costs and created a pause for some net lease investors looking to acquire assets at higher cap rates. Additionally, some sellers may choose to hold assets versus a sale given a decline in value. Consequently, transaction volume in the second quarter of 2022 was down approximately 15% when compared the same time period in 2021.
Lower priced net lease properties experienced less impact in pricing due to the higher likelihood of cash purchasers. Inversely, higher priced properties faced more upward cap rate pressure as net lease investors saw diminished leveraged returns for these assets as borrowing costs increased. Aside from CMBS lending which remains volatile, net lease lending terms remained status quo with the exception of interest rates. Rising rates caused lenders to constrain loan proceeds, limiting loan-to-value in order to keep healthy debt service coverage ratios.
Net lease investors will be carefully monitoring the Federal Reserve’s monetary policy and its impact on the capital markets. Transaction activity will remain dependent on the velocity of 1031 buyers motivated by tax consequences and seller’s willingness to move to pricing that meets non-1031 buyer’s return thresholds. Cap rates will continue to face upward pressure as additional rate hikes from the Federal Reserve are expected in 2022. However, the limited supply of properties with long term leases to credit tenants will keep competition amongst investors.
Dallas-area Power and Lifestyle Center Sells
JLL Capital Markets announced today it has closed the sale of Glade Parks Town Center, a 559,457-square-foot destination retail power center with a lifestyle component in the Dallas-area community of Euless.
JLL marketed the property on behalf of the seller, a joint venture between Iron Point and North Rock. Big V Property Group acquired the asset, making it their fourth retail center in Texas and the first in Dallas.
Glade Parks Town Center is home to a diverse roster of nationally recognized retail and restaurant tenants, including Dick’s Sporting Goods, Total Wine & More, Cinepolis, Ulta Beauty, Belk, Michael’s, HomeGoods, EOS Fitness, First Watch, Hopdoddy, Daiso, Old Navy, Burlington, DSW, Massage Envy and more. Completed between 2014 and 2018, the center boasts a three-story parking garage and is shadow anchored by Target and an Aloft Hotel.
Spanning 53.52 acres, Glade Parks Town Center is at 2701 Rio Grande Boulevard along Highway 121, one of the largest east-west thoroughfares in the Dallas-Fort Worth area. This location exposes the property to more than 120,000 vehicles per day, and this location provides accessibility to a daytime population of nearly one million people. The center is adjacent to Colleyville, Grapevine and Southlake, some of DFW’s “super zips,” which are neighborhoods featuring exceptionally high household incomes and collect educated residents. Nearly 312,700 residents earning an average annual household income of $105,344 live within a 15-minute drive.
The JLL Retail Capital Markets team representing the seller was led by Senior Managing Director and Co-Head of JLL Retail Capital Markets Barry Brown, Senior Managing Directors Chris Gerard and Ryan Shore and Analysts Greyson Fewin and Matthew Barge.
Institutional Property Advisors Closes Five-Property Texas Multifamily Sale
Institutional Property Advisors (IPA), a division of Marcus & Millichap, announced the sale of 1,437-unit, five-property Royalton Portfolio. Four properties are in the Dallas-Fort Worth metro area and one is in suburban Austin.
“All five properties are newly constructed assets in high-growth, suburban locations,” said IPA Senior Managing Director Drew Kile. “They are all market-leading assets within their submarkets and all experienced exceptional leasing velocity.”
Kile and IPA’s Joey Tumminello, Will Balthrope, Jordan Featherston, Michael Ware, Taylor Hill, Kent Myers, Asher Hall, Grant Raymond, and Jeffrey Kindorf represented the seller, SWBC Real Estate. The team also procured the buyers, Lightbulb Capital Group, the family office of Jay Schuminsky, purchaser of the Metroplex assets and Brixton Capital, which acquired the Austin-area property.
“Class-A asset sales like these drove the highest transaction velocity since 2018 in the Metroplex last year, and more market-leading apartments traded hands in 2021 than in the past 20 years,” added Tumminello.
The Royalton Portfolio properties are:
The Royalton at Grand Prairie: 300 units built in 2021, Grand Prairie
The Royalton at Craig Ranch: 271 units built in 2021, McKinney
Central Park at Craig Ranch: 271 units built in 2019, McKinney
The Royalton at Rockwall Downes: 295 units built in 2021, Rockwall
The Royalton at Sunfield: 300 units built in 2021, Buda
“Austin’s multifamily marketplace continues to be a strong draw for multifamily investors, and with over 60,000 new residents projected to move to the city by the end of the year, prospects for continued growth are excellent,” said Balthrope. “IPA in Texas provides investors with a large inventory of high-quality multifamily investment opportunities in every market, offering local market research and sales expertise in Dallas-Fort Worth, Houston, Austin and San Antonio.”