California-based Rich Uncles real estate investment trust (REIT) has acquired its third Central Florida asset, paying $6.75 million Monday for a two-story, Class A office building in Maitland Center Commons.
RU Chief Investment Officer David Perduk told GrowthSpotter he learned about the property through an e-mail blast from the seller's agent and was immediately attracted to it because of the strategic location.
"Maitland is a part of the Orlando MSA, and that is one of our top 15 markets in the US," he said Tuesday. The Central Florida office market is particularly strong in several of RU's defined metrics: job growth, rent growth and vacancy forecast.
The 33,100-square-foot office building sits on a 3-acre parcel at 2601 Westhall Lane. It was built in 1985 and underwent a complete renovation in 2014, achieving LEED Gold Rating.
It's also located just off Keller Road, which now serves as the main entrance to the Maitland office park, since the previous entrance was relocated due to construction of the I-4 Ultimate.
"It hit all of the metrics about what we like in a property," Perduk said. That included the right type of tenant, price point and cap rate.
Joe Rossi, managing director of investment services for Colliers International Central Florida, represented the seller, BRWHP Properties LLP. Rossi said the partners were on the reverse end of a 1031-exchange and were under a tight deadline to complete the sale before mid-April.
Rossi said the listing attracted multiple offers, but the seller ultimately accepted the all-cash offer from Rich Uncles NNN REIT Inc, a non-traded public REIT.
"The timing was a big driver," Rossi said. "We're talking 60 days from the day we launched our offering on Jan. 26 to the closing on March 27."
RU typically makes cash purchases and finances approximately 50 percent Loan-to-Value after closing, Perduk said. "We receive more positive financing terms if we place debt on the property post-closing," he said. "Plus, we feel it puts us in a stronger position as a buyer because we can offer a fast close, non-contingent on financing."
The sale price on the Maitland property equates to $203.82 per square foot, which is the highest price per square foot paid for an office building in Maitland Center since the last cycle's peak sale of $230 per square foot in 2008.
Rossi told GrowthSpotter the sellers had invested $950,000 in the renovation three years ago, which bumped the property in the Class A category. Perduk said the Gold LEED certification made the building an especially attractive investment.
"Whenever you have an environmentally friendly office building, that shows a commitment to the property and an owner who is trying to conserve energy and protect the environment," he said.
The sole tenant is exp U.S. Services Inc., which has extended its lease term for an additional 10 years through November 2026 with the lease fully guaranteed through corporate parent, exp Global Inc.
"The market for single-tenant net leased properties is very strong right now, as attractive financing terms and predictable cash flows create good conditions for investors," Rossi said. "The buyer has purchased several single-tenant net leased properties throughout the country, so this property fit perfectly with its acquisition criteria."
Based in Costa Mesa, RU was founded in 2012 to provide the opportunity for any size investor, starting with just $500 to own institutional quality commercial real estate. RU is considered an emerging growth company, which means it doesn't fall under the same borrowing limits as online crowdfunding sites.
The firm's Califorinia REIT closed to investors in 2016 with a total of 21 properties and $140 million in assets under management.
The current REIT is a national $1 billion offering for securities, through an S-11 which will be leveraged at approximately 50 percent Loan-to-Value. It currently has 11 assets under management totaling $58 million.
Matthew Armstrong, an attorney with Broad and Cassel, advises clients on nontraditional fundraising platforms. He said financial tech firms like Rich Uncles are attractive to small investors because they have found a way to eliminate the high commissions and fees that used to come directly out of the investor's pocket.
Armstrong said crowdfunding sites and emerging growth companies, like Rich Uncles, have made non-traded REITs an accessible investment tool.
"Locally, I think people are more interested in exploring it because I do think it's the future, and it's easier to reach out to a wider audience and national pool of investors," Armstrong said.
RU strives for an equal balance of office, retail and industrial assets. So far the firm's three Central Florida assets comprise more than half of the value of the national portfolio.
Last summer, RU paid $11.25 million -- all cash --for the Accredo Health Group/Express Scripts campus at 6272 Lee Vista Blvd. in Orlando.