Stock Storage Bldg

CASE STUDY:
Winning Maximum Value in Secondary Markets

Background

Monroe Stor & Lock, located in Monroe, OH, held significant investment potential, partially due to its location in one of the state’s top 10 fastest growing cities. Although located in a secondary market, Stor & Lock boasted strong visibility and traffic counts. The property also had expansion potential with the opportunity to double the facility’s size, however, the private ownership/management was seeking an exit strategy due to the market stage.

Senior Associate: Zack Urow, 813.400.2375
Director: Ryan Clark, 216.302.3661

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Challenges

Our sellers engaged the SkyView team to churn the national buyer pool and identify groups willing to offer the highest price and best terms for a stabilized asset in a secondary market. The sellers understood that the market cycle was nearing the tail end of a bull market and that the facility’s price likely would not reach today’s value for the next seven to ten years. While physical occupancy was 99% at the time the property sold, rental rates were roughly 10% below market.

Experiencing similar circumstances? Email Zack Urow at zurow@skyviewadvisors.com or call 813.400.2375.

Strategy

Monroe Stor & Lock presented a classic value-add deal that SkyView has experience in transacting: although the property was performing below its full potential, the proper foundation existed to increase value with improved management. Through our in-depth underwriting process, a keystone of our 252-point proprietary process, the SkyView team effectively communicated the asset’s value to the market throughout the marketing process.

Result

The SkyView Call for Offers Process yielded 10 offers with a 33% delta between the highest and lowest offers. Half of the offers came from private equity firms, with one national private equity firm ultimately purchasing the property.  Both the seller and the buyer realized value from the deal. SkyView communicated the property’s potential to the buyer and afforded the seller an exit opportunity during a small window, which still exists, to realize maximum value for deals. SkyView’s strategy capitalized on the low interest rate environment and low cost of capital that allowed buyers to stretch for more deals.

Takeaways

A new trend is taking place, with capital targeting increasingly popular secondary and tertiary markets that offer higher yields and less new-construction competition. Groups are also more open to class-B and class-C properties due to the highly competitive market for class-A assets in core markets.

A small window to sell deals in this bull market still exists. While many investors prefer yield-producing, stabilized deals, properties in lease-up are still successfully trading. Buyers are wary of the next recession, as we're in the midst of the longest post-World War II economic expansion in US history. Buyers are demonstrating an increased appetite for properties in smaller markets, as long as those properties have favorable rental rates and income trends. 

If you are thinking about selling or have questions about the market, click here to schedule a call

Edited by: Paris Patrick, SkyView Marketing
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