SJTC Sold, Valued at $750MM

[simms3]

Surprised like hell that nobody caught this.

http://www.jaxdailyrecord.com/showstory.php?Story_id=543124

4.1% cap rate, is extremely low for any market, let alone Jax.  That's basically unheard of.  I'm sure yields are in the same area, and Deutsche (formerly RREEF) will own this on behalf of some foreign separate account (my guess) for 10-15 years or more.

Article says rents range from $40-80psf, which is pretty solid for Jacksonville.  For perspective, rents in Atlanta's best malls rarely exceed $100psf, though occasionally.  So if there are $80+psf rents at SJTC (likely for smaller tenants and perhaps some F&B tenants), that's pretty amazing.

I peg that valuation at $600-700psf because I don't know exact square footages under the ownership structure.  Just a guess.  That's approaching the big city $1,000+psf number.  DC retail often trades at this sort of number, so Jax can claim that it's in the same ballpark as DC!

Further cements SJTC as the most valuable real estate in NE FL, by far.  By far.  One of the only assets that would attract the full slew of institutional investors who prefer, generally, to stay in NYC, SF, Boston, and DC.  That's big time.

I'm sure Carter made out REAL WELL.  Timing wasn't great for him, because I bet he could have redeployed this $$$ into his dream project up in Atlanta, now controlled by a firm out of San Diego.

[fieldafm]

The cap rate is not surprising. Retailers are generating very healthy sales/sq ft, meaning rents should continue to rise compared to relatively low carry costs on the property.

Although the debt service is a little higher on River City Marketplace, it will also be an attractive resale to a certain class of institutional investors in the next 5 years.

[ChriswUfGator]

Surprised like hell that nobody caught this.

http://www.jaxdailyrecord.com/showstory.php?Story_id=543124

4.1% cap rate, is extremely low for any market, let alone Jax.  That's basically unheard of.  I'm sure yields are in the same area, and Deutsche (formerly RREEF) will own this on behalf of some foreign separate account (my guess) for 10-15 years or more.

Article says rents range from $40-80psf, which is pretty solid for Jacksonville.  For perspective, rents in Atlanta's best malls rarely exceed $100psf, though occasionally.  So if there are $80+psf rents at SJTC (likely for smaller tenants and perhaps some F&B tenants), that's pretty amazing.

I peg that valuation at $600-700psf because I don't know exact square footages under the ownership structure.  Just a guess.  That's approaching the big city $1,000+psf number.  DC retail often trades at this sort of number, so Jax can claim that it's in the same ballpark as DC!

Further cements SJTC as the most valuable real estate in NE FL, by far.  By far.  One of the only assets that would attract the full slew of institutional investors who prefer, generally, to stay in NYC, SF, Boston, and DC.  That's big time.

I'm sure Carter made out REAL WELL.  Timing wasn't great for him, because I bet he could have redeployed this $$$ into his dream project up in Atlanta, now controlled by a firm out of San Diego.

I think the cap rate's explained by the sale including a bunch of still-undeveloped land, he sold his entire interest in the project not just the phases that were already completed. So from a cap rate perspective the buyer is probably looking at it in terms of the total after the rest is built out, which would explain the price.

[simms3]

The cap rate is not surprising. Retailers are generating very healthy sales/sq ft, meaning rents should continue to rise compared to relatively low carry costs on the property.

Although the debt service is a little higher on River City Marketplace, it will also be an attractive resale to a certain class of institutional investors in the next 5 years.

The cap rate is actually very surprising for a number of reasons (this is a high street cap rate seen in NYC, SF, Chicago, LA, Miami, and Boston, NOT typical of Jax for any sort of product, that I'm aware of).

Because of that cap rate, and because I guarantee you this is for a separate account, this is not going to be resold in 5 years.  Nobody buys a fortress mall at a 4 cap and sells in 5 years.  The implied yields are already as core as it gets, and core assumes yield is the play, not return.  The only way I see this selling in 5 years is with how Phase III is structured in ownership.  Is Nordstrom under a lease or do they own their own building?

I think the cap rate's explained by the sale including a bunch of still-undeveloped land, he sold his entire interest in the project not just the phases that were already completed. So from a cap rate perspective the buyer is probably looking at it in terms of the total after the rest is built out, which would explain the price.

Perhaps that's it.  However, isn't Phase III leased up?  If so, then Deutsche considered future contractual cash flows associated with Phase III, and that 4.1% cap is totally stabilized, and LOW.

Good for Jax!  My old firm looked at Markets at Town Center when it was on the market, but it was too core for us and we didn't understand Jax very well/were skeptical of the power center setup at the time.

[fieldafm]

SJTC is a very, very solid shopping center for a variety of players. Institutional investors weren't looking at buying the property to flip it, they were buying as a long term play. Judging by your reaction, you'd be surprised then by several suitors interested in purchasing it.

[simms3]

No, I was surprised by the cap rate, which has nothing to do with my thoughts on SJTC.  I know it's a solid shopping center, I work on deals like this for a living (we just went hard on a $420M deal that I've been underwriting and our pricing assumptions aren't as aggressive as they are for this, despite being in a coastal gateway market).

I was rebutting your comment that Deutsche will have a solid opportunity to sell in 5 years to another institutional buyer. Nobody pays a 4 cap for a stabilized fortress mall to sell in anything under 10 years.  Deutsche (formerly RReEF) is already as institutional as it gets.  They operate super core funds and have separate accounts for investors looking for piggy banks.

[Ocklawaha]

And still no rapid transit... DING!

[fieldafm]

No, I was surprised by the cap rate, which has nothing to do with my thoughts on SJTC.  I know it's a solid shopping center, I work on deals like this for a living (we just went hard on a $420M deal that I've been underwriting and our pricing assumptions aren't as aggressive as they are for this, despite being in a coastal gateway market).

I was rebutting your comment that Deutsche will have a solid opportunity to sell in 5 years to another institutional buyer. Nobody pays a 4 cap for a stabilized fortress mall to sell in anything under 10 years.  Deutsche (formerly RReEF) is already as institutional as it gets.  They operate super core funds and have separate accounts for investors looking for piggy banks.

I never said Deutsche was looking to sell SJTC in 5 years. I said in 5 years the River City Marketplace will be ripe for a large sale (not SJTC money, but some pretty large REITs will show significant interest). I've been doing this longer than you have, not that resumes matter whatsoever in regards to this conversation

[thelakelander]

Sources: Multiple developers courting Skinner family for shot at next phase of Town Center

The deal Ben Carter struck to sell his ownership stake in the St. Johns Town Center is likely to attract the attention of national developers, who may end up moving dirt sooner rather than later.

"Multiple" developers are already lining up for a shot at the next phase of the St. Johns Town Center, the vacant land north of Town Center Parkway, according to real estate sources who asked not to be named because of the sensitivity of the deal. The developers are courting the landowners — the Skinner family, whose vast Jacksonville land holdings included the dirt that became the Town Center.

full article: http://www.bizjournals.com/jacksonville/news/2014/06/06/sources-multiple-developers-courting-skinner.html

[pierre]

^^^^^^^^^^^

Just picturing what that traffic is going to look like on Gate Parkway.

[FSBA]

Only a matter of time before it was going to happen. Any major stores that would make sense in the next expansion?

[pierre]

Only a matter of time before it was going to happen. Any major stores that would make sense in the next expansion?

I assume we could see more department stores and restaurants.

Red Robin?

Trader Joe's?

There was talk a few years ago of a bowling alley.

[edjax]

See that WSJ had a story on the sale today per JBJ and the article stated they believe this is the lowest cap rate for any mall sold in the US since the economic downturn.

[simms3]

See that WSJ had a story on the sale today per JBJ and the article stated they believe this is the lowest cap rate for any mall sold in the US since the economic downturn.

I wouldn't be surprised.  A 4-cap is astounding for any stabilized asset in NYC, SF, Boston, or DC, where occasionally pricing will be this aggressive - for stabilized assets.  Let alone Jacksonville where there should be fireworks for anything that sells for less than a 6 or 7 cap, lol.

I mean, sure, Phase III doesn't open yet, but what is that 6 months of a lack of cash flow from a minor segment of the center?  There was probably a seller credit or some sort of proration for that, which might mean an effective cap rate of 4.5%.  That's still basically record breaking (and certainly is for the market)!  This is the pricing groups pay for an address or small portfolio of addresses in Miami Beach along Lincoln, Washington, Collins, or Fifth (which has an enclosed shopping center that just sold a year or two ago for similar pricing).  So to pay the same for a 50% stake in a suburban mall in Jacksonville is just amazing.