Boost Returns On Net Lease
Iridium Capital has found a way to produce higher yields in net lease. This week, we snapped the crew: analyst Michael Kyriak, valuation vet David Kane, CFO Sean Shanahan, and founder and president Marilyn Kane. The secret: a hedge fund capital structure and assembling portfolios. Iridium buys pre-leased properties in bulk from preferred developers (those with exclusive construction contracts with retailers). Iridium's first portfolio purchase closed in December: Iridium and Paradigm Capital paid $14M for 10 to-be-built Dollar Generals in seven states. It'll close a $13M acquisition of five Dollar Generals and two 7-Elevens in June and expects to invest another $30M to $50M by year's end.
To realize the 20% to 50% discount- to-market price that Iridium has created by buying in bulk, Sean tells us, the company plans to hold properties for one to three years, then assemble them into larger portfolios to sell, the $20M-plus (at market price) pools that net-lease REITs go for. Meantime, it's also checking out big-box stores as resurging retailers like Home Depot and Lowe's expand again. And for its next capital source, Iridium is chatting with pension funds and considering endowments and religious trusts. Above, one of the new Dollar Generals in Holly Hills, Fla.