Net Lease Conference and S & P Commercial Real Estate in NYC

News from Net Lease Conference and S & P Commercial Real Estate in NYC last week.

Role of Non-traded REITs in Net Lease Sector; Inflation; Debt Rates were all hot topics.

It was clear, both statistically and anecdotally, that the emergence of non-traded REITs is now confirmed since they effectively control 50 % of the net lease market acquisitions.

So if you have been a Buyer, like many of our client base, and have been getting out bid in the last 6 quarters, there is good reason……these REITs see real estate differently than the traditional savvy investor. 

Like many investors, today, they are seeking “yield” and now Net lease properties, as an  asset class, are really coming into their own since they can afford:

• Stable, predictable income streams;
• A partial hedge against inflation (subject to lease structure);
• Depreciation as a tax benefit;
• Appreciation and residual value  (if you don’t over pay in the 1^st place)

That last point is a major current issue when you are, effectively, competing with these REITs in an almost “Auction Environment” in recent months for product.

Cap rate is one comparative reference point; but we think a hard look at the risk-adjusted return is critical.  Your ability to secure acceptable debt ratios and rates, combined with addressing the re-financing risk, as we perceive it, is paramount.  Less so, in the review of these REITs who are fee-based operations.  We utilize a 62,000+ NNN national data base + our network of net lease practitioners and owners to identify “Best-of-Breed” NNN assets that match client-specific criteria for:

• Tenant Credit for secure income streams;
• Remaining lease term and scheduled increases to address inflation fears;
• Debt and re-financing risk;
• Location; location; location……not all Walgreens are the same;

All of theses issues need attention; not merely a cap rate debate.

Call us to produce results for you that match your investment objectives.