Horvath, Tremblay Cash in on Net-Lease Fervor

CRANSTON, RI — Think of it as another way of saving, and $472 per sf spent to secure a ground lease on the 2,900-sf TD Bank here is perhaps more understandable, especially since the investors are hardly alone in the voracious pursuit of netleased real estate, a pattern Marcus & Millichap Vice President Robert Horvath is witnessing up front as partner Todd Tremblay and he help owners cash in on the mania. Besides the $1.3 million Cranston exchange completed on Thursday, the Bostonbased team this past month closed on a CVS/Burger King combo in Concord, NH, that yielded $7.36 million for their client, while across the border in Haverhill, they handled both sides on the Applebee’s deal.

As if that were not enough, Horvath and Tremblay also orchestrated the $1.8 million sale of a Burger King on Route One South in Saugus, a 3,700-sf unit that was also served up with an adjacent 18,300-sf parcel providing a development opportunity on a roadway that sees 70,000 vehicles pass by daily. The seller is Flamingo Realty Trust, which prior to the disposition had inked a lease extension through 2021 with the restaurant chain. Burger King has been at the site since the eatery’s construction in 1975, a longevity matched heretofore by the seller. An affiliate of Greenwood Management Inc. is the new owner of 1431 and 1449 Broadway (Route One). Greenwood’s president is James M. Mega of Somerville.

The CVS/Burger King asset in New Hampshire’s state capital is a newly constructed property that yielded a 5.9 percent cap rate in the trade. “Great response,” Horvath says of the listing, and observes it illustrates how investors are willing to pursue tertiary markets for netleased product, as evidenced by the Horvath and Tremblay listing map that extends across New England and even south into such states as Alabama, Georgia and Florida. “We do quite a bit in New Hampshire,” conveys Horvath, pointing to a Nashua Rite-Aid the duo sold to begin 2013, as previously detailed by the Real Reporter.

With 14 years left on its original 20- year lease, the Applebee’s garnered strong action as well, says Horvath, whose client was 56 Plaistow Road LLC, an entity managed by William H. Goldberg. The buyer is Jodam Realty, managed by John Papadopoulos. “That is a great retail location and has always been a good performing unit” for Applebee’s, Horvath says in explaining the ardor generated for the 5,200-sf restaurant that sits on a 1.3-acre parcel along Route 125, but he stresses it is nothing out of the ordinary as Tremblay and he prepare for the final 10 weeks that could be so charged as to break a record 2012 campaign. Capital chasing net leased properties from day care centers and phone stores to pharmacies and restaurants have shaken off springtime jitters about rising interest rates that some feared would put the skids on leveraged investing. But “it hasn’t had any impact,” reports Horvath. “Rates are still really low and there is so much pent-up demand we are getting five offers on everything we put out . . . It is a seller’s market with a pool of buyers actively pursuing netleased product.”

The net-leased expert says he knows of three groups each sporting more than $100 million to shell out for regional opportunities. The TD Bank asset is fresh off the block, having been constructed in 2012 on a visible 30,000-sf parcel. That leaves 19 years remaining on the original commitment, with rent escalations every five years and a quartet of five-year renewal options. It provides a 9.6 percent average cap rate over the base term.

As to the largest of the October closings, the 2.1-acre Concord property at 153-157 Louden Rd. has leases extending to Jan. 2038 for CVS Pharmacy and its 13,225 sf, whereas the restaurant can serve up burgers in its 2,600-sf unit through 2110, having signed a 99-year ground lease. The tenants are jointly responsible for common area maintenance.