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The Bay Area Real Estate Journal
Bay Area Property Investor Makes Deal in Central Texas
Submitted Mar 12, 2009
Tiburon-based Ratel Investments has acquired a 185,000-square-foot shopping center in central Texas for $19.8 million from a well-known real estate investment trust liquidating assets in order to raise capital.
The deal was completed at a capitalization rate of just less than 8 percent and was executed by assuming fixed-rate debt whose term runs to 2017, said Ratel Principal Ron Sann. The debt carries a rate of 5.67 percent.
“I am excited by this transaction,” Sann said. “The asset is well-performing, and after our assumption, there was more equity in the transaction.”
The purchase is notable if for no other reason than that it happened at all, given the nearly frozen capital markets and the difficulty of commercial real estate buyers and sellers to achieve mutually acceptable prices. At the same time, it is of the ilk that many in the commercial real estate community expect to arrive en masse starting later this year as existing owners face maturing debt that they cannot refinance acceptably or confront liquidity issues that force sales.
Perhaps not surprisingly, the transaction took more than four months to consummate; the most-elongated debt assumption in his professional career, Sann said. The loan is securitized but carries a covenant that it is assumable as long as the loan-to-value ratio does not exceed 80 percent.
It is the third acquisition for the Ratel Value Fund I; the first two were multifamily complexes in San Jose’s Willow Glen and the city of Fairfax in Marin County. The fund, which opened in July 2008 and will close this coming July, has in excess of $12 million in equity. The original equity target was $15 million, which Sann still hopes to achieve.
“Given the economy, we are frankly thrilled to be at $12 million,” he said.
He expects to acquire two additional assets for the fund in the next two years.
The shopping center is in San Marcos, a community on Interstate 35 that sits south of Austin and north of San Antonio. San Marcos is well-known regionally for its large cluster of outlet shopping centers. The center in question, San Mar Plaza, is within a mile of the Texas State University campus in San Marcos. It is 100 percent occupied; its tenants are value-retailers expected to fair better than others in today’s economic environment. They include Payless ShoeSource, Supercuts and AutoZone.
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