Market Analysis : Victor Alexander, New York City And Philadelphia

1709 WordsApr 5, 20177 Pages
Opportunity Overview I, Victor Alexander, have sourced the opportunity to invest in a 160,000 square distribution center, constructed in 2000, in Somerset, NJ. The property is extremely well placed, as it is in close proximity to New York City and Philadelphia, along Boston-Washington DC corridor, and located within 20 miles of 100,000 businesses that employ nearly one million people. The property offers 24’ clearance height, 40’ x 40’ column spacing, 24 loading/truck doors, and 220 parking spaces. The property is currently fully leased to three credit tenants, all of which have expressed an interest in renewing their leases as soon as they expire. Investment Strategy This opportunity represents a Value-Add Investment strategy, a slightly…show more content…
We will hold this investment, as stated earlier, for a five-year period, after which we will dispose of the asset. Selling the asset after a five-year hold make sense as it allows us to take advantage of a major bump in base rent starting in year six of the investment (assuming we lease all three tenants to the leases they have indicated interest in signing), meaning that we can sell the asset for much more than we could before year five due to the significantly higher NOI associated with this greater base rent. We will then plan to sell the property, at the end of year 5, at a 7% cap rate, a figure that represents a mere 22 basis point increase from our entrance cap of 6.78%. Despite maintaining that this deal represents a Value-Add investment, there are some aspects of this deal that make it seem safer, and more similar to a Core+ investment. One major positive attribute of this deal, which will be discussed further in the Primary Attributes section of this investment memo, is that it requires very low capital expenditures aside from the miniscule $32,000 annual reserve I have underwritten to cover all smaller capital expenditures associated with operating the property. Additionally, this property provides a consistent equity after-tax current yield every year, something more common in a Core or Core+ investment than a Value-Add investment. However, between the higher return profile, shorter hold
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