TUCSON LEASE REPORT – NOVEMBER 4-8, 2013

Real Estate Daily News RETAIL – 3682 W. ORANGE GROVE, MARANA
Conn’s has leased a ± 40,000 sq. ft. space at Marana Marketplace, 3682 W. Orange Grove, Tucson located on the SE corner of Orange Grove Rd. and Thornydale Rd. in Marana Arizona. The premises will be used as a retail store for the sales of home appliances, consumer electronic, home and office furniture, mattresses and other home/office and related products and accessories. They are scheduled to open for business in the spring of 2014. Andy Seleznov, CCIM, Director of Leasing at Larsen Baker represented the landlord. Nancy McClure with CBRE’s Tucson office represented the tenant.

RETAIL – 3682 W. ORANGE GROVE, TUCSON
The Guitar Center has leased a 11,412 sq.ft. space at Marana Marketplace Shopping Center, 3682 W. Orange Grove, Tucson, located on the southeast corner of Orange Grove & River. The Premises will be used for the sale, rental, and repair of musical instruments. They are scheduled to open for business in the third quarter of 2014. Andy Seleznov and Melissa Lal represented the Landlord, Larsen Baker, while Regan Amato, of Phoenix Commercial Advisors represented the Tenant.

[mepr-show rules=”58038″]$14 -35 psf (Annual), NNN[/mepr-show]

OFFICE – 698 E WETMORE, TUCSON
Dermatology and Plastic Surgery of Arizona, LLC leased 2,470 square feet of medical office at 698 E. Wetmore Road,#310 Tucson, from First Ave./Wetmore Office Plaza, LLC. Andrew Sternberg of Oxford Realty Advisors handled the transaction.

[mepr-show rules=”58038″]Phone  to reach tenant- 520-458-1787[/mepr-show]

OFFICE / MEDICAL – 3395 N. CAMPBELL, TUCSON
Dr. Charles B. Evans leased a 2,550-square-foot medical office space at Rillito Corporate Park, 3395 N. Campbell Ave. Dr. Tucson. Evans is a Scottsdale-based internalist and men’s health specialist. This is the second practice location for the tenant, who plans to take occupancy in early November. David Montijo with CBRE’s Tucson office represented the landlord, Sante Fe, N.M.-based H.P. Enterprises LP. Alan Laulanien with Coaction Group LLC in Phoenix represented the tenant.

[mepr-show rules=”58038″]Tenant’s Phone – 480-588-6924[/mepr-show]

RETAIL – THE TUCSON PLACE SHOPPNG CENTER
College Vapor has leased a 2,167 sq.ft. Space at The Tucson Place Shopping Center, located on the NW corner of First Ave. & Wetmore Rd. Tucson. The Premises will be used as a store specializing in the sale and on-site use of if electric cigarettes and related equipment. They are scheduled to open for business October 2013. Andy Seleznov, CCIM, Director of Leasing at Larsen Baker handled the transaction.

RETAIL / RESTAURANT – 8300 N. THORNYDALE, TUCSON
Mama’s Hawaiian Bar-B-Cue leased a 2,000 square-foot restaurant space at Cortaro Plaza, 8300 N. Thornydale Road, Suite 120, Tucson.. The new Mama’s Hawaiian Bar-B-Cue location, the third in the Tucson area, is expected to open mid-January 2014. Craig Finfrock of Commercial Retail Advisors, LLC represented both the landlord, Cortaro Investments, LLC, and the tenant, Mama’s Family Restaurants, LLC, in this transaction.

[mepr-show rules=”58038″]Phone – 520-792-2350[/mepr-show]

OFFICE – CRAYCROFT PLAZA
Youth & Families First, has leased a 1,449 sq.ft. space at Craycroft Plaza, located on Craycroft Rd., just north of Speedway Blvd. The Premises will be used as an office specializing in youth and family counseling. They are scheduled to open for business November 2013. Andy Seleznov and Melissa Lal represented the Landlord, Larsen Baker, while Nancy McClure, of CBRE, represented the Tenant.

[mepr-show rules=”58038″]Tenant Phone – 623-435-6840[/mepr-show]

RETAIL -4821 E. GRANT RD., TUCSON
Good Feet has leased a 1,268 sq.ft. space at Crossroads Festival, 4821 E. Grant, Tucson, located on the NE corner of Grant Rd. & Swan Rd. The Premises will be used as a retail store specializing in the sale of arch supports, orthotics, shoe inserts orthopedic and conform shoes and related footwear items. They are scheduled to open for business December 2013. Andy Seleznov and Melissa Lal represented the Landlord, Larsen Baker. Advisors handled the transaction.

[mepr-show rules=”58038″]Tenant Phone – 1-800-509-4535[/mepr-show]

OFFICE – 1611 N. WILMOT, TUCSON
1701, LLC did a 485 square foot sublease at 1611 N. Wilmot, Suite 106, Tucson, with De Benedetti & Company. Andrew Sternberg of Oxford Realty Advisors represented the Tenant and James Hardman of Desco Southwest, represented the Landlord.




PHOENIX SALES TOTALING $3.76 MILLION

3101 W Indian school
3101 W Indian School, Phoenix – photo courtesy of Derito Partners

RETAIL – 3101 W INDIAN SCHOOL ROAD, PHOENIX

Bill Johnson’s Big Apple West restaurant at 3101 West Indian School Road in Phoenix sold for $675,000 ($65 PSF) to Scott Capital Holdings of Arizona, LLC for the 10,346- square-foot building. Martin Leon and Chris Corso with DeRito Partners in Phoenix represented the buyer. Mike Myrick, Chris Ferow, Shelby Tworek and Gabe Ortega of NAI Horizon of Phoenix negotiated the sale for the seller, Bill Johnson’s Restaurants, Inc.

690 E Warner
690 E Warner, Gilbert, photo courtesy of Sperry Van Ness

OFFICE CONDO – 690 E WARNER RD, GILBERT

A 1,366-square-foor office condo (built 2006) at Warner Plaza, 690 E Warner Road in Gilbert sold to C&R Investment Group, LLC for $116,110 ($85 PSF). Justin Horwitz with Sperry Van Ness of Phoenix represented the seller.

INDUSTRIAL – 6150 W GILA SPRINGS PLACE #26, CHANDLER

Bernards Chandler, LLC sold a 5,018 square-foot industrial property at 6150 West Gila Springs Place, Building N 26, in Chandler for $600,000 ($120 PSF). Rod Beach with Cresa Phoenix represented the buyer, Gila Springs Building, LLC. Rick Foss and Laurel Lewis of NAI Horizon in Phoenix represented the seller.

OFFICE – 595 N DOBSON ROAD, SUITE A15, CHANDLER

Victory Associates II, LLC sold a 2,441 square-foot medical condo at 595 N Dobson Road, Suite A15 in Chandler for $366,150 ($150 PSF). Roy Grinnell with Benchmark Commercial represented the seller. Mike Myrick and Alexandra Loye with NAI Horizon of Phoenix represented the buyer, Reddy GI Associates.

4.76 ACRES VACANT LAND AT MCDOWELL MNT RANCH & THOMPSON PEAK PKWY

A 4.76 acre parcel at the southwest corner of McDowell Mountain Ranch and Thompson Peak Parkway sold to Capital Services, LLC for $2 million ($9.65 PSF). Lance Umble of Phoenix Commercial Advisors in Phoenix represented the buyer and Neil Sherman of Sperry Van Ness of Phoenix represented the seller, Sina East, LLC. (Watch for more information to follow on this transaction.)




Details of a $6 Million “Zero” Sale

CVS, 7740 N Cortaro, Marana
CVS, 7740 N Cortaro, Marana

CVS Pharmacy Store, at 7740 N Cortaro Road in Marana, at the southwest corner of Silverbell Road and Cortaro Road, sold for $6 million ($414 PSF). The ±14,419 SF building (built 2003) on 2 acres, was fully leased to CVS Pharmacy Store #8420 and sold with a twenty-five year absolute triple-net lease backed by a corporate guarantee.

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[mepr-show rules=”58038″] The transaction sold in a “Zero Cash Flow” or “Zero” sale as it is sometimes called, one of the least understood types of real estate structure in the net lease market today. So we’re going to take a stab at explaining it, and the best way to do that, is to jump right into the fire with this transaction.
A few things stand out as unusual with this sale and “zero” sales in general, besides the odd numbers. First, the financing loan to value is high! A $5,206,865 loan on a purchase price of $5,967,280 is an 85% LTV. These “highly leveraged” LTVs cannot be achieved by just going out and buying any property on the market.

This kind of leverage in zero deals requires a strong tenant such as a CVS. Typically, tenants must have a strong S&P rating of at least BBB and be strong bond net leases. CVS (NYSE:CVS) has an S&P rating of BBB+.

A second unusual feature is that the financing of zero properties is assumable, fixed rate, non-recourse, and often full amortization. At the end of the loan term, the property is owned free and clear of debt. With the financing already in place,  the loan is easily and quickly assumable at a low cost to buyers, attractive for 1031 Exchange buyers.

Third, and here’s the basis as to why it’s called “zero cash flow,” or “zero” – all of the property’s net operating income goes directly to service the underlying loan, with none remaining for distribution to the owner. Wells Fargo is the lender of our CVS deal in Marana. This might not sound attractive to all investors, but this real estate structure does have its benefits.

One of the key features of zero sales is called “Paydown/Readvance”. This is usually a one-time option that allows the property owner to pull out a large amount of cash from the property. This feature is perhaps the number one reason why zeros are so popular for 1031 Exchange buyers. Use the pulled out cash for whatever reason you want – without any fear of violating the exchange rule (since all the exchange requirements have already been satisfied). Use the money to go out and buy another property (you get to start all over again on depreciable basis), use the money for working capital, use it to go to Vegas, or whatever. The point is, you can use it for whatever you want.

Further, the more seasoned that zeros become (older) the more valuable they tend to get, as the owner gets closer to the day of owning it free and clear.

Remember, there are no landlord responsibilities with a zero. Investors may buy zero properties to put into their 401K or for the grand-kids who won’t need the cash for awhile.

So how does one calculate the cap rate on a zero property? Values for zero cash flow properties are usually expressed as a percentage over the debt. Or to value the property as any other NNN property by applying a cap rate to the NOI. It should be noted that both of these methods determine “gross” values and not a “net” value. That is to say that the net value (Gross Value minus the Debt) is the actual out of pocket cost to do the deal.

“The attractiveness of zeros is a function of equity over debt and the assumption of leverage,” Steve Underwood of Phoenix Commercial Advisors summed up to us. “And the tax benefits to the owner, something only an accountant can calculate.”

The seller, SCP Capital of Utah has been selling CVS Pharmacies in this manner since 2001 when Staubach of Texas acquired 10,000 active CVS store leases in a major sale/leaseback deal for $288 Million. The buyer was Marana Zero I, LLC; Marana Zero II, LLC; and Marana Zero III, LLC of Sandy, UT (Scott Beynon, managing member).

Steve Underwood and Chad Tiedeman of Phoenix Commercial Advisors in Phoenix handled the transaction for buyer and seller.

Underwood should be reached at (602) 288-3477 while Tiedeman can be contacted at (602) 288-3472 for more information.[/mepr-show]

 

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[ismember]Sale date was 8/2/2013. Exact sale price was $5,967,280. Broker reported cap rate of 8.97% based on NOI. Market time was 242 days. This was the buyers’ upleg in a 1031 exchange.  [/ismember]