OAKLAND, CA-Equitas Investments of Hermosa Beach, CA has acquired a single-tenant, net-leased property here that required a special kind of investor to seal the deal because only two years remained on the original 15-year lease, according to Pegasus Investments of Los Angeles, which represented Equitas. EVP David Chasin of Pegasus tells GlobeSt.com that unlike typical NNN deals with long terms remaining on their leases, "This was one of those deals where we needed to idenitfy a very sophisticated buyer who could underwrite a single tenant net-leased transaction with a very short lease term remaining."

The property is a freestanding building that is net-leased to CSK Auto Inc. for a Kragen Auto Parts store at the signalized intersection of two of the most highly trafficked thoroughfares in Oakland and a short distance from Oracle Arena & McAfee Colisseum, home of the Oakland A's and Raiders. The different type of investor Chasin refers to pretty well categorizes Equitas, according to Aaron Swerdlow, founder and senior managing partner.

"Given our depth of experience, we understand and recognize good retail real estate," Swerdlow explained, "therefore we can jump on these type of opportunistic acquisitions when other investors may shy away from them." Swerdlow's track record includes ground up development, repositioning and lease negotiations with many of the nation's top retailers. "Given Aaron's knowledge of the tenant's business and his reputation for being able to move quickly, Equitas was at the top of our interest list," added Chasin, who represented Equitas along with Ken Chasin and Aaron Aszkenazy of Pegasus.

Chasin emphasized how different this deal was from typical NNN sales, 25 of which Pegasus closed last year, all with lease terms of 10 years or more remaining. Banks will provide "very aggressive" financing on deals with long lease terms remaining, provided the tenant is creditworthy, Chasin explained.

On the other hand, banks don't like to lend on NNN properties with short lease terms remaining because they are worried that the building will go vacant at the end of the lease, so buyers need to be able to pay all cash, Chasin said. "A deal like this attracts a different kind of investor because you could buy a lot more property with the same amount of cash if you had financing," he explained.

As a result, Chasin said the NNN Kragen property required "an investor who totally understood the market, totally understood the tenant." He says Equitas, "made the determination that there is a very high probability that Kragen will exercise its renewal option." The situation enabled Equitas to buy the property at a discount (price was not disclosed) because there was no competition from typical NNN buyers who are looking for deals with long terms remaining on the leases, Chasin said.

The seller, a charitable trust that was represented in the recent sale by David Sowels of Western Cities Realty in Fairfield, CA, originally bought the property from the developer in 1997.