Iridium's Kane Charts NNN Success

NEW YORK CITY-The first in what is expected to be a series of joint-venture acquisitions between Iridium Capital LLC and its private equity partner closed this past December, marking a milestone for the company co-founded by veteran retail broker Marilyn Kane. That the acquisition was a portfolio of 10 Dollar General stores is in keeping both with Kane's background and with Iridium's focus on net lease.

Launched in late 2009 as commercial real estate was just beginning its climb from the trough, Iridium is now established as a significant player on an increasingly crowded playing field, thanks to its flagship IC Income and Growth Fund LLC. “When we started the fund, with my background as a commercial real estate broker, I felt I was privy to many listing opportunities, because my world was that of the brokers and the large brokerage firms such as Sperry Van Ness and Stan Johnson & Co.,” Kane tells GlobeSt.com.

“What has developed is that the developers themselves have reached out to us," she continues. "They have learned of our fund and will often be in touch with us when they get the mandate from the large corporations to build the stores. We're offered that opportunity to go in and purchase them in pre-construction.”

For Iridium's part, an advantage is that “we don't have to make a very large commitment,” says Kane. “We can put down some earnest money or make a commitment with a document.”

This in turn enables the developer to have a buyer in place “and then go out and get his construction loan,” she says. This whole world of relationships with owners and developers is different from the original broker world that introduced us to properties. It's a new manifestation of what we're doing.”

Furthermore, success has begat success when it comes to dealing with lenders. “We enjoy having relationships with lenders who really like having the security of our investment in the true triple-net with single-tenanted buildings that are corporately guaranteeing the rent,” says Kane. “It's a safe bet. It's not all that easy to get loans these days, at least not the way it used to be. But we're finding that it's a wonderful world of lenders out there,” notwithstanding the “very stringent” documentation those lenders require.

Since Iridium began buying Dollar General locations, the chain has gotten a ratings upgrade from Moody's Investors Service. “That has really impacted our rate of return for investors,” Kane says. “We're also looking at 7-Elevens and a number of other true triple-net situations. We're very careful in substantiating the creditworthiness of these corporations. When we find one we like, we really go for it. We allow our investors to come in and participate in these stores that they could not necessarily purchase on their own.”

Given that net lease acquisition is now an increasingly competitive field, Kane is well aware that would-be investors have many vehicles from which to choose. “One of the things that make us appealing to investors is that we're allowing them to come in at a minimum of $100,000,” she says. “Not coming from the world of hedge funds, that seemed to be like a reasonable investment for regular people.”

Iridium's principals like “a very long term, and you can get these properties at very high cap rates if you buy them with three or four years left on them,” says Kane. “We avoid that, because we look at these as long-term investments and we're not going to keep them for the full length. When we sell them, we like to get enough of a tail on that lease so that we can get a very good, substantial value from the next buyer.”