Monday, November 21, 2011

Triple-Net Triple Threat

Investors vie for the safety, convenience, and ROI of top net-leased deals.
by Sara Drummond
Looking for a rock-solid investment in a shifting economy?
Look no further than single-tenant net-leased properties. In markets where shopping centers sit empty and office buildings are dark, the lights are on (usually 24 hours) at the corner drugstore — provided it’s a Walgreens or a CVS. With their investment-grade credit ratings and penchant for long-term leases, these drugstore triple net-leased deals attract top dollar in almost every market.
But drugstores are only one of a stable of creditworthy tenants for net-leased deals, according to a recent anecdotal survey of CCIMs. Other tenants are also attracting buyers. CCIMs report that everyone from all-cash individual buyers in small towns to big-city real estate investment trusts are looking to add one, two, or 20 of these stable investments to their portfolios.


From every U.S. region, CCIMs report that the NNN supply is tight and the demand is high. “The entire state of California has more money than product,” says George L. Renz, CCIM, of Renz & Renz in Gilroy, Calif. He has the investors: His biggest challenge is finding deals with good intrinsic value that “truly reflect safety and truly reflect investor’s goals — most of which involve risk avoidance.”
In Atlanta, “I am seeing more out-of-town buyers from everywhere in the country and even international,” says Virginia I. Wright, CCIM, vice president of net-leased investments for Bull Realty. “With a strong lease, tenant, and location, they are satisfied without having to visit the property and just enjoy the rent checks. Many buyers would love portfolios of properties; however, these are more difficult to come by.”
Many of those portfolios are going to institutional investors that have turned their attention to net-leased product in the past few years. REITs, insurance companies, and pension funds have contacted CCIM brokers in smaller markets this year, looking for portfolio deals.

Money Is Available

One reason for the interest in net-leased deals is that financing is available at all levels. With most net-leased properties priced under $5 million, many single-asset purchasers buy with cash, according to the CCIM market round-up. “We have been doing transactions almost always with knowledgeable all-cash buyers who want to close swiftly,” says Rob Murdocca, CCIM, of Prescient Property Group in Wayne, Pa.
Len S. Jarrott, CCIM, of Jarrott & Co. in Santa Barbara, Calif., has completed ...
Click here to read more