E&K Land is a Real Estate company that does not rely on leverage. On a typical deal we use debt to finance less than 45% of the purchase. Our lenders informally categorize our loans as corporate credit bonds since we have long term investment grade tenants and a low leverage ratio.
Our goal is to search for properties that are anchored by strong credit tenants and positioned in markets that allow for easy tenant replacement. Our property at 447 Milwaukee Ave in Vernon Hills is located in the heart of the Hawthorn Mall corridor is a great example.
We purchased 447 Milwaukee Avenue for $6.8 Million in 2016 and borrowed $3.1 Million or 45% of the value. The note was a 10-year term with a 10-year amortization. This approach allows the site to cash flow close to zero and be fully unencumbered at the end of the 10 years.
Given the market’s current conundrum (stocks overvalued and bond yields on the rise) by blending low debt with a high corporate credit our yield (7.7%) is an exceptional alternative. Given rent increase embedded in the lease, we also feel forward values of the sites will do well.