Investment real estate activity starts to pick up

There has seen little to no nonresidential investment real estate activity over the past two to three years, but there have been a number of transactions in 2010 that may be the first signs that investors are back in the game.It is very encouraging that there have actually been arm’s length deals involving properties that are operating well and generating cash. Mallard Pond Plaza on Second Street in Manchester, a 35,812-square-foot strip center, sold in June for $2.125 million. While capitalization rates are not generally disclosed, sources indicate that it was approximately 10. In early October, All Around Storage in Derry sold for $1.55 million. This is a well-located 319-unit self-storage facility built in 2006 that sold for less than a 10 cap rate.Also in Derry, the former Allen Motors on Route 28 sold in August for $1.277 million, or a little over $61 per square-foot. The property consists of a 21,000-square-foot former auto dealership on 4.61 acres, at a signalized intersection, and adjacent to a proposed new Wal-Mart. Plans for the site have not yet been disclosed, although it will most likely be for retail use.In August, the office building at 168 South River Rd. in Bedford was sold for $1.7 million, or a little over $91 per square-foot. There was significant vacancy in the building for some time, but the new owner reportedly has a large tenant in tow to fill the vacant space, and plans major renovations to the property.Welcome newsSome foreclosures have occurred, but nowhere near the number that many people have anticipated. “Distress properties” have not flooded the New Hampshire market as they have in other states, and thus few opportunities have arisen to acquire properties at bargain = basement prices.In March, the Woodbury Court property in Bedford was foreclosed on and bought by a Massachusetts investor for $2.805 million, a price far above what most observers felt the foreclosing lender would get.There were also foreclosures on two pure retail properties. In July, Digital Federal Credit Union foreclosed on Central Realty Plaza on Amherst Street in Nashua. The marquee tenant in this 20,000-square-foot center was the Chen Yang Li restaurant. Bidding at the sale was extremely light, with most observers feeling the lender’s bid was higher than they were willing to go. The lender still owns this property.In September, the Brothers North center on Route 1 in Hampton was sold at foreclosure for $2.2 million to a Hudson investor. This attractive center has a little over 23,000 square feet and was built in 2007. Vacancy is fairly high, but the investor reports that he received at least a handful of calls from interested tenants even before he closed on the deal.There was one other foreclosure in Merrimack on what has come to be known as the Reeds Ferry Village Complex, the site of the former Madden’s Restaurant. An out-of-state investor bought the land and partially completed building at foreclosure in January for $555,000, or a little over $56 per square foot. He finished the buildout, and now two of the four units in the 10,000-square-foot property are rented out.There also have been some sales of net leased properties, including the Walgreen’s in Londonderry at the corner of Route 102 and Mammoth Road, the TGIF Friday’s on Loudon Road in Concord, and the Applebee’s on Route 28 in Derry. These were surely all cap rate deals, based on cash flow, but the actual rates are not available. In most cases, net lease deals involve out-of-state buyers.What does all of this mean? First, it affirmatively answers the question as to whether there is any investment sale activity taking place in the state, and that is welcome news.Second, it bodes well for more activity. Supply of these types of properties has been extremely limited, and the gap between what sellers wanted and buyers would pay was just too wide to bridge. When sales actually take place, it demonstrates that buyers are in the market looking to acquire properties, and that seller expectations have been lowered. The fact that the majority of the deals noted were arm’s length reflects that the price gap is being narrowed, albeit slowly.Third, the transactions help to establish market value. With generally all property types, there has been a dismal lack of comparable sale information for the past two to three years, thus making it difficult for parties and lenders to come to grips with values. These sales will all help to establish values going forward.Dan Scanlon, JD, CCIM, is an adviser with Grubb & Ellis|Northern New England, Bedford. He can be reached at 603-206-9605 or djs@grubbellisnne.com.