Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from Craig Schmidt with Bank of America/Merrill Lynch.
Craig Schmidt - Bank of America/Merrill Lynch.
This should go to Dave. I'm just wondering, the 76 cap rate on the PL transaction, I realize that it may not be total exemplary, but where do you think CapEx have moved for quality coming into the neighborhood centers, say, in the last two years, as you start to see the transaction market open up again?
Dave Henry
We've seen a distinct change. Six-seven months ago cap rates were definitely in the mid-eights and probably heading towards nine for even the best quality shopping centers. But as you know, there weren't a lot of transactions happening.
Over the past several months, it's really opened up and Westbury is a good example. I think there were more than 20 bids on that particular shopping center, which is a high quality shopping center. So we've seen a substantial shift in the demand for high quality retail. The investors we meet with are definitely being much more aggressive today than they were, especially foreign institutions which have seen the value of their currency increase compared to ours and feel today is an excellent time to invest in high quality retail in the United States, especially with a hint of inflation down the road for good hard assets.
The cap rate is only one function of acquiring properties. The quality of the properties themselves is a factor. Secondly, the debt that can be assumed. Many investors are looking at below market debt that can be assumed as an attractive feature. And third, replacement costs. If you can buy assets significantly below what they can be replaced for down the road, that's an [awesome] element.
We think the 76 cap rate for this quality portfolio is a fair cap rate and we're happy with it. We're exceptionally happy to keep these crown jewels in our portfolio. As Mike pointed out, we have the time to either put this with other investors or do something else with them and we will do that. We moved expeditiously and this was a negotiated purchase and we preempted an auction process.
Craig Schmidt - Bank of America/Merrill Lynch.
How long do you think it would be before you get the final financial structure for the PL Retail?
Dave Henry
Very quickly. I think over the next couple of months we will decide exactly what we're going to do with this long term.
- To read the full transcript on Seeking Alpha, click here »
