Hines Pays $89M for Raleigh Retail Center
The 190,000-square-foot community retail center sale marks a more than one-third increase in value over the past eight years.
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Waverly Place. Image courtesy of Hines.
Northwood Investors has sold Waverly Place, a 190,000-square-foot retail center in Cary, N.C., to Hines Global Income Trust for $88.5 million, according to public records. The sale price marks a 33.7% increase in the asset’s value since it last changed hands for $66.2 million in late 2014.
Located on 22.5 acres at 302 Colonades Way, the retail center opened in 1988. Anchored by Whole Foods Market and Cinébistro, the four-building property is also home to a number of other tenants including Shake Shack, CorePower Yoga, and Drybar. The asset, last renovated in 2000, also contains 16,000 square feet of office space.
Hines’ Paul Zarian, managing director, noted that the REIT plans to secure new, “key” retailers for the property in the near term to add to the strong, long-term tenants already in place.
Retail’s Upside
Though many investors see brick-and-mortar retail as a relic of the past, thanks in no small part to the enormous growth of e-commerce, the sector still has a strong investment upside — though this is certainly not true of all retail commercial real estate.
In recent years, a push toward experiential retail has buoyed occupancy at many shopping centers, and neighborhood grocery-anchored assets have also performed well. Hines’ latest acquisition appears to cover both bases, given its tenant mix, and the REIT has given a nod to expanding events on-site as a way of cementing a strong user base within the Cary submarket.
Related Questions
What are the benefits of investing in commercial real estate?
Investing in commercial real estate can offer a variety of tax benefits, such as accelerated depreciation, mortgage interest deductions, and reduced tax burdens for beneficiaries. For instance, if an investor buys a commercial property for $3 million, and its value increases to $4.5 million before the investor passes away, the investor’s beneficiaries will only need to pay taxes on the $1.5 million that the property has appreciated, not the entire $4.5 million sale price. This can save an investor’s heirs hundreds of thousands or even millions of dollars.
For more information, please visit www.commercialrealestate.loans/blog/the-top-10-tax-benefits-of-investing-in-commercial-real-estate.
What are the risks associated with investing in commercial real estate?
Commercial real estate is generally considered to be a higher-risk investment due to the potential for tenant default and the longer lease terms. Leasing velocity is much slower than in multifamily or single-family residential real estate, and so a vacant building may take longer to completely fill than a residential property.
Other risks associated with investing in commercial real estate include:
- Market volatility
- Interest rate fluctuations
- Inflation
- Changes in local economic conditions
- Changes in zoning laws
What are the current trends in commercial real estate financing?
The commercial real estate landscape has undergone — and is regularly undergoing — a great deal of change. This has been driven by a number of factors, such as the rapid rise of e-commerce, long-term systemic issues in the retail sector, the growth in popularity of coworking space, needs of the Millennial and Generation Z workforces, and shifts in market demographics and household formation.
Debt funds, which generally consist of private equity firms, sovereign wealth funds, pension funds, and similar institutions, are growing as an alternative source of commercial real estate debt, especially due to their additional flexibility and ability to move more quickly than traditional lenders. In 2017, U.S. and North American debt funds originated $32.3 billion of debt.
In terms of loan products, borrowers can expect to find a variety of loan products, such as fixed-rate loans, adjustable-rate loans, bridge loans, and mezzanine loans. Fixed-rate loans are typically the most popular option, as they offer the most stability and predictability. Adjustable-rate loans are also available, and can be beneficial for borrowers who are looking for a lower initial rate. Bridge loans are short-term loans that are typically used to finance a property until a more permanent financing solution can be found. Mezzanine loans are a type of loan that is secured by a borrower's equity in a property, and can be used to finance a variety of projects.
What are the best strategies for financing a commercial real estate purchase?
The best financing option for your commercial real estate purchase will depend on your specific needs and financial situation. Generally, banks are a popular choice, but have tougher lending requirements for investment properties than for the purchase of a primary residence. For multifamily properties with five or more units, agency loans from Fannie Mae, Freddie Mac, or HUD Loans can be extremely beneficial. Even the SBA has a few options for the acquisition of commercial real estate. It is important to research all of the available options to find the best fit for your investment strategy.
What are the tax implications of investing in commercial real estate?
Investing in commercial real estate can have a variety of tax implications. One of the first and most important things any commercial real estate investor should do is find a qualified tax professional who knows and understands the field. Working with a professional can help you reduce your levels of stress and use some of the best strategies when it comes to taxes and your property.
When it comes to taxes, you can deduct employee wages, independent contractor costs, and professional fees. This includes things like legal fees, property management fees, and accounting fees. Additionally, if you pay an independent contractor more than $600 in a single calendar year, you will have to send and file 1099s for them, since you qualify as a professional commercial real estate investor.
It is important to note that tax laws are constantly changing, so it is important to stay up to date with the latest changes and work with a qualified tax professional to ensure you are taking advantage of all the deductions available to you.