MIAMI—Who are the most active investors of FedEx buildings? What are the challenges impacting interest in FedEx buildings? What does the future hold for the investment in FedEx buildings?
GlobeSt.com caught up with Britton Burdette, an associate director at Stan Johnson Company, to get answers to these questions in part two of this exclusive interview. You can still read part one: Why Investors Are Bidding Hard for FedEx Buildings.
GlobeSt.com: Who are the most active investors of FedEx buildings? What are each of them interested in?
Burdette: The single tenant-focused institutions have been the most active from a transaction count standpoint, but they have not been the most aggressive investors in relation to cap rates. The new Ground hub facilities with fresh 15-year lease terms have been trading in the low 6 caps and have largely been going to domestic and international private capital groups.
These private exchange and foreign buyers are more flexible on their return requirements as their primary focus tends to be on the preservation of wealth. Because of this, the marketing process is much more granular in how the property is exposed to the market when pursuing offers. The single tenant intuitional buyers have been grabbing many of the FedEx leased deals with more seasoned/renewed leases or offerings located in smaller markets where they can get a bit more yield.
GlobeSt.com: What are the challenges impacting interest in FedEx buildings?
Burdette: Rent per square foot and price per square foot are typically the largest challenges in selling a FedEx facility. As a result many institutional buyers have not been able to get down to the lowest cap rates for the new Ground hub facilities.
Typically rents in new FedEx facilities are over market, due to FedEx’s locational and facility requirements for the most part. The FedEx offerings with 15-year leases have provided a good deal of relief to this challenge by giving buyers more time to return capital in the primary term.
GlobeSt.com: What does the future hold for the investment in FedEx buildings?
Burdette: Demand for FedEx leased assets should remain healthy in the near term. FedEx has proven its network, and investors understand its value. FedEx plans to roll out a number of new Ground facilities and investors will pay a premium for these new assets. I would not be surprised to see one of the new hub facilities break into the 5 caps at some point in the near future.