If you're a small local real estate investor, chances are you've found yourself swimming with a lot more big fish lately.
As commercial property values in gateway cities such as New York, Boston and Washington have ratcheted back up to levels last seen during the credit bubble, more and more institutional investors have turned their attention to second- and third-tier markets, including the Triangle.
These investors - real estate investment trusts, insurance companies, investment arms of big banks - have blown into town armed with lots of cash and a mandate to spend it.
For local guys such as Morisey Commercial, competing with them isn't really an option.
"At the end of the day they're going to pay more than we are," said Frank Morisey, the firm's owner. And sellers are going to be more confident that larger firms can get the financing necessary to close deals. "But there's a niche for finding those assets that the national guys aren't going to go after," Morisey said.
Case in point is the Little Brier Creek Center in Raleigh, which Morisey Commercial bought for $4 million earlier this month.
The 17,200-square-foot retail center is 91 percent leased with a tenant roster than includes national chains such as Pei Wei, Sport Clips, Papa John's Pizza and Firehouse Subs.
Located near the intersection of U.S. 70 and Brier Creek Parkway, the center was built in 2005. It sits in a popular northwest Raleigh shopping area where developers are planning several new apartment complexes.
Morisey Commercial bought the property from Weingarten Realty, a publicly traded REIT that paid $4.55 million for the property in July 2006.
"This particular asset didn't fit them," Morisey said. "It was too small for Weingarten but it was the perfect size for us."
Making the deal even sweeter was the fact that the cap rate - the ratio of a property's annual net income to its purchase price - was a healthy 8.75 percent. And Morisey Commercial was able to get financing at a fixed interest rate below 5 percent.
"When you do the spread on that, it produces an excellent ... return," he said.
Morisey Commercial, which owns retail, office and multifamily properties, represents a handful of local investors. Morisey bought the retail center through FMR Properties, an entity whose managers include Frank L. Robuck Jr., John C. Morisey Jr. and Thomas L. Fonville, according to filings with the N.C. Secretary of State's office.
John Morisey is Frank Morisey's father.
This is the first acquisition Morisey Commercial has made this year, proof that finding niche quality assets at the right price remains a challenge.
"They're hard to find," said Morisey, who worked as a broker for Tri Properties before starting Morisey Commercial in 2008.
Although property values in the gateway cities are unlikely to remain at their current levels forever, institutional investors will not suddenly forget about the Triangle when they do.
While the region faces a good deal of economic challenge, its diverse economy and educated workforce give it a distinct advantage over many other markets.
In its Emerging Trends in Real Estate report for 2012, the Urban Land Institute ranked the Triangle as having the second-best investment prospects among metro areas with populations under 2 million.
The only market that ranked higher was Austin, Texas - another state capital with a strong presence of technology, biotech and pharmaceutical companies.
All this is to say that small local real estate investors should probably get used to swimming with bigger fish.
