Southpointe on High
Suburban Retail / Lease Up
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Targeted Hold Period:
* There is no guarantee that targeted returns will be achieved or that preferred return payments will be made.
- Compelling Basis: This opportunity is compelling from a price per square foot ($158/SF) and going-in yield (6.7%) basis relative to nearby competitors like Derby Square ($310/SF, 6.5% yield).1
- Attractive Cash-on-Cash Return with Durable NOI: The Co-Managers are obtaining favorable lending terms in a rising rate environment and expect to produce strong risk-adjusted returns characterized by high average annual cash yield. The in-place retail rent roll performed well during COVID, with only Saturday’s salon closing and Planet Fitness deferring two months of rent (that has since been repaid).
- Pricing Dislocation of Retail Asset Class: Fears of e-commerce, COVID, and oversupply nationwide have reduced investor appetite for retail, causing a cap rate discount relative to other asset classes. Per Real Capital Analytics, retail cap rates have remained attractive even as warehouse/distribution and residential apartment cap rates have become more expensive through 2021.2 We believe this opens opportunities for specific kinds of well-located retail to outperform other asset classes.
- Internet Resistant & Durable Tenants: The tenant mix at the center serves mostly daily needs, including takeout pizza (Little Caesar’s), job recruitment (Army & Marines), cell phones and service (Boost Mobile), and medical (First Choice Chiropractor).
- Mismanaged Property: The current owner has no prior retail experience and has neglected both the existing tenants as well as the current vacancies, thus generating opportunities for improved tenant relations, property operations, and leasing outcomes.
The business strategy is subject to change. There are many risks to participating in this opportunity. See “Risk Factors and Fee Disclosures” in the Offering Memorandum for a discussion of some of these risks, including loss of capital, illiquidity, lack of diversification, and capital call risks. This opportunity is unsuitable for investors who are not prepared to hold their ownership position indefinitely and who cannot afford a complete loss of capital.
1 CoStar Sales Comparable Data, accessed April 18, 2022.