This publicly traded company has been rated bbb or

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of the major mid-Atlantic state metropolitan areas. This publicly-traded company has been rated BBB+ (or better) for the past 7 years. Convenient Marts has recently embarked upon an aggressive expansion campaign, targeting the suburban areas of secondary mid-Atlantic cities for new stores. As a result of this expansion effort, S&P has placed Convenient Mart's debt on a "credit watch," expressing concern that this effort may result in lower quality cash flows
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and an increased debt burden. You have sold 10 of the 12 Convenient Mart stores you developed. In each case, you sold them within 18 months of completion for an average cap rate that has a spread over the 10-year Treasury of about 210 basis points. The two properties you have not sold have been completed within the past 12 months. You anticipate that these properties will each sell for a spread of about 200 basis points over the 10-year Treasury during the next year. Currently, the 10-year Treasury rate is 4.25%. Development of a Convenient Mart requires 10-16 months to complete. Typically, it requires about 12 months to develop. Convenient Marts has approached you and asked you to play a major development role in their expansion effort.
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