Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 4,170-square-foot medical office building located at 104 Market Path in Georgetown, Kentucky. The property is fully leased to BlueSprig Pediatrics, which recently merged with Florida Autism Center and Fusion Autism Center to become the leading provider of applied behavior analysis therapy services in the southern U.S. for children diagnosed with autism spectrum disorder. Stan Johnson Company’s Ryan Roedersheimer represented the locally based seller. A private buyer from Kentucky acquired the asset for nearly $1.1 million. “This was a challenging transaction as BlueSprig isn’t yet a well-known brand, and they only signed a five-year lease,” said Roedersheimer, Associate Director in Stan Johnson Company’s Cincinnati, Ohio office. “However, we were able to generate multiple offers just below list price and demonstrate the strength of the location and business model of the tenant.” The property was built in 2000 on 0.76 acres in a northern suburb of Lexington, Kentucky. The site is strategically located near Georgetown Community Hospital and serves a rapidly growing population.

Excerpt of article originally published by GlobeSt Sale leaseback deal volume increased in Q2 this year by 93% versus the same period one year ago. On a sequential basis, deal volume was up 17%, according to an analysis by SLB Capital Advisors. According to its managing partner, Scott Merkle, declining cap rates, anticipated tax changes and heightened M&A activity, drove the higher deal volume. Merkle added, “We anticipate the momentum seen in the first half will continue during the second half of 2021.” Investors Open to 5- to 7-Year Terms Robert Poirier, Associate Director, Stan Johnson Company, agrees. He said investor demand for sale leasebacks has improved significantly over 2020 and should continue to do so throughout 2021 as well as into Q1 2022. “Values have surpassed pre-pandemic levels, and in some cases, we’re seeing cap rates more than 100 basis points lower than just 12 months ago,” Poirier tells GlobeSt. “We are also seeing investors become more open to shorter term leaseback periods.” Poirier said that a year to 18 months ago, the average lease term for an industrial sale leaseback, for example, was 12 years. “Today, we’re seeing more investors open to 5- and 7-year terms,” he said. “I’m working on an assignment now that we took to market last year at a 7.20% cap rate. We ended up pulling it off the market temporarily and just brought it back out. We’re receiving offers with cap rates of around 5.75, which is almost a 150-basis point improvement. This example is true testament to current market conditions that, again, I expect will last into early next year.” Industrial Segment Represents 53% of Overall Transactions From a transaction standpoint, SLB Capital Advisors reported that sale leaseback activity increased 17% to 185 transactions in Q2 2021 vs. the previous quarter, reaching $3.6 billion, the second largest transaction count and dollar volume since Q4 2019. “While we witnessed a return to optimism in the retail segment, Q1 and Q2 this year exhibited continued strength in the industrial segment, representing 53% of overall transactions – industrial sale leasebacks continue to demand attractive pricing even in non-core markets,” according to the report. Larger notable deals in Q2 include Benderson Development’s acquisition of the Kroger Co.’s retail properties for $487mm and Gaming & Leisure Properties acquisition of two entertainment locations from Bally’s Corporation for $484mm. Given heightened M&A activity leading into the second half of 2021, SLB Capital Advisors expects sale leaseback activity to follow suit.  

Originally published by GlobeSt Blue Owl Capital has entered into a definitive merger agreement to acquire Oak Street Real Estate Capital and its investment advisory business for $950 million. The transaction is expected to close in the fourth quarter of 2021 and is subject to customary closing conditions. Oak Street is a Chicago-based firm, founded in 2009 with over 35 employees and with $10.8 billion of assets under management as of June 30, 2021. The firm focuses on two primary strategies: structuring sale-leasebacks, which includes triple net leases, as well as providing seed and strategic capital. Market Ripe for Sale Leaseback Transactions “Right now, the market is ripe for sale leaseback transactions, and there are a couple factors pushing the popularity of this category,” Katie Elliott, Stan Johnson Company Associate Director, tells GlobeSt. “What we saw during the pandemic was a flight to safety, with investors seeking security with long-term leases and credit-worthy tenants occupying essential, mission critical assets. Many sale leasebacks fit this category, in particular industrial assets because you can’t manufacture from home, therefore increasing the ‘stickiness’ of a tenant to a location. Elliott said another trend she is seeing in the sale leaseback market is private equity sponsors utilizing real estate as a differentiator in their bids to acquire companies. In 2021, U.S. private equity dealmaking exceeded previous annual records and with the competitive environment, many sponsors are thinking outside the box. “With today’s low cap rates, there is an underlying value arbitrage between the business EBITDA multiple and effective real estate multiple, potentially resulting in millions of dollars of value creation,” Elliott said. “We are still in a low interest-rate environment, and though we are seeing the 10-year treasury begin to creep up, we still expect cap rates will remain stable throughout 2022 due to the dislocation of supply and demand and money pouring into the net lease category.” Oak Street Leadership Team Will Remain in Place Oak Street’s active net lease funds primarily focus on single tenant properties, net leased to investment grade and creditworthy tenants, under long duration leases. The Seeding and Strategic Capital business focuses on investing in early-stage real estate managers across various industry sectors. The platform provides strategic institutional capital to managers typically enhanced by attractive general partnership economics and an active governance role. The platform seeks to work with strongly aligned management teams with leading investment capabilities, oftentimes led and controlled by women and minorities. Upon closing of the transaction, key members of the Oak Street leadership team will remain in place, and Oak Street’s Chicago office will become an additional office for Blue Owl. In addition, Marc Zahr will join Blue Owl’s Board of Directors and Executive Committee.  

Originally published by GlobeSt Easterly Government Properties, a REIT focused on commercial properties leased to the US government, has formed a joint venture with one of the preferred leading global investors. The joint venture will serve as the investment vehicle for the acquisition of an anticipated 1.2 million leased square foot portfolio of 10 properties expected to close on a rolling basis by the end of 2023, which is 100% leased to the Department of Veterans Affairs, for a purchase price of approximately $635.6 million under predominately 20-year firm term leases. Easterly’s partner will retain a 47.0% stake in the JV. Easterly will retain a 53.0% stake in the JV. Easterly will also receive asset management fees from the JV partner and be responsible for the day-to-day management of the properties. The properties are in Chattanooga, Tenn.; Lubbock, Texas; Lenexa, Kan.; San Antonio, Birmingham, Ala.; Columbus, Ohio; Phoenix; Marietta, Ga.; Corpus Christi, Texas; and Jacksonville. Expect More Cap Rate Compression in Essential Assets Brian Corriston, Director in Stan Johnson Company’s Houston office, tells GlobeSt that demand for essential assets “seems to be at an all-time high, and government-leased assets fit that profile perfectly. History has shown, besides the credit backing these leases, these assets have an extremely high rate of renewals. “With the stickiness of a tenant such as the VA, relocating becomes even less likely, and that’s an incredibly attractive characteristic to investors. “One challenge I’ve seen, however, is that non-experienced investors sometimes have difficulty acclimating to the full-service structure of the lease, where the landlord has significant responsibility compared to net lease structures. “But as capital is readily available and interest rates remain low, this sector of the market should remain attractive and strong for the foreseeable future, and I expect we’ll continue to see cap rate compression in 2022, especially compared to pre-pandemic trends.” Easterly Deal Includes Class A, Green Globe Facilities The 100% build-to-suit VA Portfolio consists entirely of state-of-the-art, Class A Green Globe Certified facilities, either recently delivered or under construction. The JV closed on the acquisition of two of the 10 properties in the VA portfolio, which are currently operating. The JV expects to close on the acquisition of the remaining eight properties on a rolling basis by the end of 2023, in connection with construction completion and lease commencement dates. Once delivered, these facilities will be the newest VA medical care centers in six of the 18 Veterans Integrated Services Networks (VISNs), which six VISNs offer critical healthcare services for approximately 7.2 million veterans, or approximately one third of the entire U.S. veteran population. Each new facility will enable the VA to expand its current services in each local market by either replacing smaller existing clinics or supplementing existing facilities with more robust capabilities in a complementary location.  

Originally published by GlobeSt   What figures to be an active Q4 2021 for healthcare real estate transactions got started on Day 1. Physicians Realty Trust is acquiring 15 Class-A medical office buildings located in eight states, comprising approximately 1,460,000 square feet, for $764.3 million. “Activity in the sector has remained consistently strong, although there is still a relatively limited supply of quality product available in the market, Toby Scrivner, Senior Director, Stan Johnson Company, tells GlobeSt. The Pending Acquisitions The portfolio is approximately 95% leased with a weighted average remaining lease term of approximately 7.4 years. Each of the 15 buildings are either located on a health system campus or are affiliated with a health system, and approximately 74% of aggregate leased space is attributable to investment grade health systems or their subsidiaries. “This limited supply, combined with increased cost of new construction, has bolstered the confidence of investors that existing tenants will likely renew, as well as providing certainty that owners will be able to increase rental rates,” Scrivner said. “PRT has historically been a very competitive buyer of on-campus-adjacent medical buildings, and this portfolio appears to have many of the hallmarks of assets that fit their criteria.” Mike Adams, Managing Director, Stream, tells GlobeSt that medical office investors are looking for steady cash flows and well positioned real estate. “Well positioned real estate is located next to major health care systems,” Adams said. “We are seeing an overarching theme of limited supply of medical office real estate. Since COVID-19, there has been a greater need for medical office space and this has led to some conversion opportunities for operators that have entrenched relationships in the market.” He said a trend he is seeing among health care systems and hospitals is “the openness for them to tap third-party ownership and management of their real estate. This has led to a flood of institutional investors taking down these deals in large sums.” PRT Sees 4.9% Cash Yield on Portfolio For PRT, upon closing, the first-year unlevered cash yield of the portfolio is expected to be 4.9%. The company expects that the transaction will be completed by year’s end. At closing, PRT anticipates funding the purchase of the pending acquisitions through the issuance of units of the operating partnership, the assumption of indebtedness on certain properties, the satisfaction of existing mezzanine loans outstanding, and proceeds from its unsecured line of credit, according to a release.  

Originally published by GlobeSt Healthcare is among the new hot investment assets, following the shake up from the pandemic. This year, healthcare pricing is nearing record levels, and cap rates are trending down, according to Scott Briggs, Senior Director and Partner at Stan Johnson Company. Briggs will speak on the topic at the upcoming GlobeSt.com Net Lease conference on October 28, 2021. “During the pandemic, with 1031 exchanges already underway and dry powder at all-time highs, that affinity became necessity as many net lease tenants sought rent relief from landlords as governments initiated public shutdowns relief—a move that sent investors and lenders reeling at the potential of what was to come as the unknown played out,” Briggs tells GlobeSt.com. “This dynamic convergence of needs caused demand for healthcare product to surge which sent prices even higher given the certainty of continued rental payments afforded by most healthcare users as net lease tenants.” The accelerated demand was true of many trends during the pandemic. In the net lease space, industrial is the asset that was really set on fire. “The pandemic accelerated already prevalent trends in the net lease space,” Briggs says. “Pre-pandemic, net lease investors exhibited an evidenced affinity for net lease product that was well-aligned with technological advances by market disrupters such as Amazon and other e-commerce providers or net lease product that was well-insulated from macroeconomic movements.” However, while industrial demand may be getting most of the attention, Briggs says that activity in the healthcare space is rivaling the monster asset class. That’s because industrial has a higher barrier-to-entry for investors. “Demand for net lease industrial product might be slightly higher, but deal sizes often preclude the average net lease investor from participating in that segment of the market directly. The accelerated trend in healthcare has not only sustained since the start of the pandemic, its pace has continued,” he adds. “Demand for most of the net lease healthcare product that we are listing and marketing today is as high as I can remember it being, and cap rates continue to trend downward.” Investors entering the market could have to navigate some regulatory challenges ahead, however, that could impact momentum. “The current topic of concern pertains to changes in Medicare or changes in tax policy that might cause a dynamic shift in supply and/or demand in net lease healthcare,” says Briggs. “This unease has yet to cause a noticeable sobering effect to the broader healthcare party, however. I anticipate the 2022 results—at least from a fundamental valuation perspective, as opposed to a pure volume or transaction count perspective—to exceed those experienced in 2021.” In fact, Briggs expects healthcare activity to remain strong well into the future, saying, “Until there is some systemic and dynamic geopolitical or macroeconomic shift and a reversal of the interest rate and cap rate trends we are experiencing, healthcare net lease will remain a priority for most private and institutional buyers for the foreseeable future.”  

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of 1555 Brampton Avenue in Statesboro, Georgia. The 6,617-square-foot medical office building is fully leased to Atlanta Gastroenterology Associates but was vacant at the time of sale. Stan Johnson Company’s Doug Clyburn and Julie Clyburn represented the seller, Hamron Inc., an Atlanta, Georgia-based private investor, in the off-market transaction. The asset was purchased by a local development firm for approximately $2.2 million reflecting an 8.84 percent cap rate. “We represented the seller of this off-market ‘dark’ medical office building located in Statesboro, Georgia,” said Doug Clyburn, Associate Director in Stan Johnson Company’s Alpharetta, Georgia office. “The tenant consolidated its operation into other facilities but has maintained the property and will continue to honor its lease for the six and a half years remaining on the original 15-year absolute triple net lease. This provides the new owner with in-place cash flow, including 2.0 percent annual escalations, and they’ll have ample time to re-tenant or redevelop the property.” The property was built in 2004 and is situated on 1.45 acres. Statesboro, Georgia is located one hour northwest of Savannah and is a healthcare leader in southeast Georgia. The site is in close proximity to the East Georgia Medical Center and is adjacent to Georgia Southern University.

So far, 2021 has been full of changes. Some have been welcomed, as we’ve begun to see an end to many pandemic restrictions that kept our country halted for over a year, while other changes could impact us for years to come. Currently, there is proposed legislation that could dramatically limit 1031 exchange transactions, or like-kind exchanges. The legislation, as originally outlined, institutes a tax deferral cap of $500,000 on like-kind exchanges, which could have a significant impact on investors if passed. In the coming weeks and months, we expect this issue to be heavily debated, and it’s possible the future of 1031 exchanges could be unclear for some time. Since it was first introduced in the 1920s, corporate and individual real estate investors have made use of Section 1031 of the U.S. tax code. It allows investors to defer taxes on capital gains by exchanging the sale proceeds and retired debt of real property into like-kind assets. Businesses that make use of 1031 exchanges span from hospitality and leisure companies to natural resources and mining companies, with many industries in between. The use of 1031 exchanges spans across our entire nation into many industries and impacts millions of individuals, directly and indirectly. "There is proposed legislation that could dramatically limit 1031 exchange transactions, or like-kind exchanges" According to a May 2021 report published by Ernst & Young, 1031 exchanges are estimated to support more than 568,000 jobs, providing approximately $27.5 billion in labor income and are expected to generate $55.3 billion in overall value to the U.S. economy in 2021 alone. Because of 1031 exchanges, small businesses that would otherwise not be able to afford expanding to a larger facility, for example, are able to grow their businesses and create jobs. Additionally, many 1031 exchange transactions involve generational properties which would not trade hands if it weren’t for the tremendous incentives and benefits offered by 1031 exchanges. Without this incentive, the market would likely become far more stagnant with fewer assets changing hands. Although this is hardly the first time 1031 exchanges have been threatened, there is perhaps more cause for concern in today’s climate, as the current political alignment in Washington makes it easier to get bills passed. However, leaders on both sides of the aisle understand the benefits provided by 1031 exchanges, and that dynamic will undoubtedly influence the final outcome. The bill, as it was originally proposed, is not specific about how changes to 1031 exchanges will be implemented if it does pass. Modifications to that section of the legislation, as well as the bill as a whole, are likely to occur prior to it being voted on. During this time of uncertainty, investors and real estate professionals alike are voicing their concerns and urging leaders to understand the importance of 1031 exchange transactions to the U.S. economy. "Although this is hardly the first time 1031 exchanges have been threatened, there is perhaps more cause for concern in today’s climate, as the current political alignment in Washington makes it easier to get bills passed. " Until more is known, investors are encouraged to stay the course. Long-term investing goals should not be abandoned, but investors must also be aware of outstanding opportunities available in today’s marketplace. While tax deferral benefits provided by 1031 exchanges are an excellent motivator for many investors, we shouldn’t lose sight of all the other benefits that come with real estate investing.   hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "b1759ef4-8bfd-43d8-b940-5891e7847eeb" });

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has announced the sale of two healthcare assets near Charlotte, North Carolina. The multi-tenant medical office building located at 4315 Physicians Boulevard in Harrisburg, North Carolina totaled 23,276 square feet and was anchored by Atrium Health. The 18,876-square-foot single-tenant property at 8560 Cook Street in Mount Pleasant, North Carolina was fully leased by Cabarrus Family Medicine, an affiliate of Atrium Health. Stan Johnson Company’s Colin Cornell coordinated the transactions which totaled $14.0 million across the two properties. Main Street Medical Property LLC, a developer based in Albemarle, North Carolina, sold the assets, with Healthcare Realty Solutions, a local private equity group, acquiring them. “This sale was conducted off-market, with the challenge being that the seller was only interested in an offer that entailed both assets,” said Cornell, Director in Stan Johnson Company’s Tulsa, Oklahoma headquarters. “Normally, we may see different buyer types for a multi-tenant medical office building and a single-tenant healthcare net lease asset. However, the buyer who closed on the transaction was attracted to both assets as they have a strong relationship with Atrium Health and geographical ties to the Southeast region.”

The proposal to curb Section 1031 of the U.S. tax code is receiving a lot of attention from commercial real estate investors. Commonly known as 1031 exchanges or like-kind exchanges, Section 1031 trades account for up to 20 percent of all commercial real estate transactions, according to a recent study by experts at the University of Florida and Syracuse University. In just the net lease sector, we have estimated that somewhere between 55 and 70 percent of transactions each year could be 1031 exchanges. Large and small investors alike rely on the 100-year-old provision which provides property investors with a tax deferral on the gain from a sale contingent upon the satisfaction of a number of conditions – the primary one being that the sale proceeds are used to purchase a like-kind investment within 180 days. Proposed legislation, however, could severely limit the current policy by allowing only gains of up to $500,000 for individuals and $1.0 million for joint filers to be eligible for deferral in any single tax year. This proposed limitation could have a material impact on commercial real estate transactions if adopted, but we encourage investors to evaluate future strategies based on their particular goals and situations, as real estate investments will continue to provide investors with benefits that go well beyond Section 1031 considerations. Here are a few benefits that investors should keep in mind amid the uncertainty of future tax policy: Predictable Cash Flow | Investment properties can generate steady monthly income. In turn, that provides owners with significant financial flexibility. Depending on their strategy or situation, investors may live off the cash flow, use it to pay down debt, invest in other assets or save it. Appreciation | Real estate often increases in value over time and can provide a substantial payout upon a sale or refinancing, particularly if an owner improves a property and increases its net operating income. Appreciation also strengthens equity in properties, which in turn enhances the net worth of owners. Residual Value | In some cases, a property’s value may fall over time. A long-term lease may expire, for example, or a tenant may go out of business. Still, unlike stocks, which can lose 100 percent of their worth, the building and underlying land does retain some value. Diversification | Investment properties can play a critical role in portfolios geared toward maximizing returns and minimizing risk. Real estate tends to show much less correlation to the day-to-day volatility – and the significant periodic disruptions – inherent in the stock and bond markets. Net lease properties in particular are viewed as stable investments that exhibit less risk relative to other assets. Inflation Hedge | The U.S. is experiencing the biggest spike in inflation in years across a broad number of categories, including food, energy and commodities. But hard assets, like real estate, tend to keep pace with rising prices and maintain their intrinsic value. The proposed legislation looking to limit Section 1031 as it is written today is certainly a concern and merits attention if and when it comes before lawmakers. But investors should not allow a single policy to fully guide their investment decisions. With or without a change to Section 1031, savvy investors will continue to choose investment properties for their risk-reward profile, portfolio diversification qualities and other appealing characteristics and benefits when compared to other asset classes and investment alternatives.   hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "56bacb0e-b23c-4f61-8892-3e9d44cfdf80" });

Originally published by The Real Deal Alliance Consolidated Group of Companies sold a Hallandale Beach medical office building fully leased to a dialysis center for $5.9 million. Records show the Bannockburn, Illinois-based commercial real estate investor, through an affiliate, sold the building at 22 Southwest 11th Street to 30 Sherman Ave. Realty. It was a 1031 exchange, according to a press release. The buyer lists the same address as Yonkers-based blood center Metro Blood Service, and is led by Metro Blood manager Laura Petitti, state corporate records show. A dialysis center run by Denver-based DaVita HealthCare Partners signed a 10-year lease for the building in November 2019, according to the release. DaVita HealthCare, founded in 1979 and led by Javier Rodriguez, is the parent company of DaVita Kidney Care and DaVita Medical Group. Isaiah Harf of Stan Johnson Company represented Alliance Consolidated in the deal. The two-story, 10,000-square-foot building was built in 2007 on 0.8 acres, property records show. Alliance Consolidated bought it in 2014 for $4 million, according to a deed. Alliance Consolidated, founded in 1995 and led by Ben Reinberg, invests in industrial, retail and office properties, according to its website. Medical offices are among the strongest real estate asset classes, with several buildings trading in recent months. In March, South Florida investor Allen Chelminsky bought medical offices at 2001 and 2007 Palm Beach Lakes Boulevard in West Palm Beach for $7 million. Chelminsky also bought a pair of Lake Worth Beach medical offices at 2290 and 2328 10th Avenue North in October for $10.9 million. And in 2019, he bought Lauderhill medical offices at 7100 West Commercial Boulevard and 7200 West Commercial Boulevard for $5 million.

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 13,416-square-foot medical property leased to Fresenius Medical Care. The dialysis facility is located at 450 South Gilbert Road in Phoenix, Arizona. An individual 1031 exchange buyer based in New Jersey purchased the asset for $9.5 million, reflecting a 5.01 percent cap rate. The buyer was represented by Jason Maier of Stan Johnson Company. The seller was a Southlake, Texas-based developer. “The buyer was putting together a portfolio and was seeking diversification,” said Maier, Senior Director in Stan Johnson Company’s New York office. “Arizona is a tremendous growth market with a significant amount of medical office development. And while there are some great operators in the medical space, very few have investment grade credit. We were able to justify the compressed cap rate due to the strong lease guarantee combined with the property’s new construction and overall quality of the real estate.” The build-to-suit facility was constructed on 2.01 acres in 2019 and is in close proximity to three major hospitals including Mercy Gilbert Medical Center. The asset features a long-term net lease with annual increases.