LOS ANGELES, June 29, 2023 /PRNewswire/ -- Pegasus Investments Real Estate Advisory Inc. and Pegasus Capital Markets Inc. (together, "Pegasus") are pleased to announce the recent acquisition and financing of a Walmart Supercenter in Linden, New Jersey (the "Property"), an affluent suburb of New York City. The Property is comprised of a freestanding 186,000 square foot building situated on a 14 acre lot subject to a 20 year, absolute triple net ("NNN") lease to Walmart Inc. (S&P: AA), ranked #1 on the Fortune 500 list with $611 billion in annual revenue. The Property is located less than 10 miles from Newark International Airport, less than 20 miles from Lower Manhattan and is surrounded by major retail and warehouse logistics due to its proximity to the Port of NY/NJ along with its strategic access to a population of 500,000 within a 5 mile radius. The Property was acquired for approximately $55 million, which equates to a 5.0% capitalization rate.
Pegasus was exclusively engaged by the purchaser, a long term partnership of high net worth investors based in Baltimore, Maryland and Naples, Florida, in connection with a 1031 tax deferred exchange. Mark Keener and Adam Block of Gallagher Evelius & Jones LLP acted as counsel for the purchaser. The seller, a joint venture between a prominent real estate private equity firm and Cypress Equities, a national retail development company, was represented by SRS National Net Lease Group.
"At a time when volume has significantly declined and price discovery has been difficult, we are very pleased to have added significant value in an advisory role on such a meaningful transaction to the client," stated David Chasin, President & CEO of Pegasus. "This process began with an initial consultation with our client way back in October 2022, when the world was a very different place. While values have since moved in our favor, the dearth of generational quality assets priced to reflect the new market realities added an additional layer of complexity to our process," Chasin added. "At the end of the day, it is not just buying at the right price, but also pairing it with the optimal financing that leads to a successful execution for the client. Being able to collaborate seamlessly with our in house debt capital markets team in a rapidly changing lending environment added incredible value to the client throughout this process," Chasin concluded.
The Property was ultimately selected from dozens of competing properties due to its exceedingly strong fundamentals, which include irreplaceable real estate, superior interstate and local access and its relatively low cost basis compared to other similar properties in the trade area. The Property's long term NNN lease, investment grade tenancy and strong store performance created an opportunity for the client to acquire a trophy asset with secure cash flow and generational upside. According to Placer.ai, the Walmart at the Property received 3.7 million visitors in the last 12 months, placing it #7 across the entire Walmart chain of 3,835 U.S. stores.
In addition to providing comprehensive deal sourcing, due diligence and transaction coordination advisory services, Pegasus was also exclusively engaged to procure long term, fixed rate, non-recourse mortgage debt to finance the client's acquisition of the Property. While the Property received attractive financing offers from all types of lenders, the client gravitated toward insurance companies due primarily to the ability to lock the interest rate upon execution of the loan application.
"Following a highly competitive marketing process, our client elected to move forward with a loan that provided a fixed interest rate coterminous with the lease with an interest only period for over half the term," explained Chad Buelow, Managing Director at Pegasus. The client locked the interest rate in late January at an aggressive spread/rate, three months prior to the closing of the downleg of the 1031 exchange and before the subsequent banking and debt ceiling crises. "In such a volatile lending environment, we are extremely pleased with the outcome and believe this high quality execution is a direct result of the underlying quality of the asset being financed, the strength of the sponsorship and our decade plus relationship with our strategic partners at Pacific Southwest Realty Services, who acted as correspondent for our lender," added Buelow.
Founded in 1988, the full service Pegasus platform specializes in providing a broad spectrum of advisory services to high net worth, multi-generational and institutional investors in connection with all aspects of middle market commercial real estate investing, including acquisition, disposition, financing, management, construction supervision and leasing. While the broader commercial real estate industry has seen transaction volume decline across the board, Pegasus continues to outperform the market in 2023 due to its unwavering focus on the retail sector, which has been a rare bright spot in this turbulent environment.
For more information, please contact the advisory team at [email protected].
SOURCE Pegasus Investments Real Estate Advisory Inc.
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