Triple-Net Triple Threat

Investors vie for the safety, convenience, and ROI of top net-leased deals.
CCIM.com
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.

Supply/Demand

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 ...

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Retail Isn't Broken. Stores Are - Harvard Business Review

Retail Isn't Broken. Stores Are - Harvard Business Review

NAI Rio Grande Valley Market Report 2011

By: Rey Anzaldua

NAI Rio Grande Valley Realtor

As global companies look to expand or relocate within the United States many of their operations require a young labor force, easy access to international sea, air and cargo ports of entry, low cost of living, and access to development opportunities.  Hundreds of companies have taken a hard look at the Rio Grande Valley in south Texas.  Two nations, one region, many choices is the marketing slogan for Rio South Texas, which promotes all of the communities on both sides of the Rio Grande Valley Border with the principal cities of Brownsville, Harlingen and McAllen, Texas and Matamoros, Rio Bravo, and Reynosa, Mexico.

Commercial real estate has stabilized in the Rio Grande Valley after a series of down years.  This makes the market one of the best in the nation and according to Forbes Magazine, the McAllen MSA ranked 4^th for best Mid Sized MSA for jobs while Bloomberg/Businessweek ranked the MSA 4^th in cost of living nationally.  The Metropolitan Policy Program (MPP) at the Brookings Institution regularly lists the 20 strongest major metro areas in the U.S.  It looks at fundamental economic issues: economic activity, housing, and employment.  The McAllen MSA was ranked in the top 20 of the Strongest Metro Areas by the MPP.

The local colleges and universities (University of Texas Brownsville and Pan American, South Texas College, Texas Southmost and Texas State Technical College), continue their growth not only in students but in construction of new buildings and acquisitions of land to accommodate the enrollment growth and movement into research and development.

Dallas Federal Reserve recent data shows a slight increase in retail sales of 6%.  With several big box retail stores set to open late 2011 and early 2012 the stage is set for a continued increase in retail sales.  Bass Pro Shops will complete construction before the end of 2011 in Harlingen while in the McAllen MSA a Costco in Pharr will be completed in the spring of 2012.  

Healthcare and government agencies continue to dominate the office market.  Retail sales in 2010 in Hidalgo and Cameron counties reached $14.5 Billion dollars confirming that the Rio Grande Valley remains a very healthy retail market.

NAI Rio Grande Valley is a focused commercial real estate brokerage, consulting, development and syndication firm serving the Rio Grande Valley and based in McAllen, Texas. Our mission is to transform real estate opportunities into profits for owners, users and investors.

NAI Rio Grande Valley advises it's customers and clients on how to maximize the value of their assets and utilize real estate to their long term advantage through comprehensive and strategic planning, execution and management.

Texas is only exception to gloomy retail picture

New Mexico Business Weekly

Date: Friday, November 11, 2011, 8:41am MST - Last Modified: Friday, November 11, 2011, 12:13pm MST

Retail activity is fairly brisk in Houston and Austin -- and sluggish virtually everywhere else.

The two Texas markets are the only U.S. metropolitan areas that have added more than 1,000 jobs to their retail sectors since the beginning of the recession in 2007.

Two other Texas metros have managed to hold their own during that span. McAllen-Edinburg has picked up 300 retail jobs in four years, and El Paso has stayed flat.

The other 96 markets in the national top 100 have suffered declines in retail-trade employment during the past four years...

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WAL-MART OPENING POP-UPS

BY ELAINE MISONZHNIK NOVEMBER 8TH, 2011

TrafficCourt

The world’s biggest retailer seems to be putting out all the stops lately to adapt to a new retail environment. Earlier this year, Wal-Mart launched its small-format Express stores, meant to allow the chain to enter urban markets with high barriers to entry and compete with supermarkets and drug stores on their own turf. Now, Retail & Consumer reports the retailer has opened two pop-up stores, measuring 1,000 sq. ft. and 3,000 sq. ft. at the Topanga Mall in West Los Angeles and at Horton Plaza in San Diego.

Wal-Mart has been quietly working on this initiative for some time, according to The New York Post. In part, this is an attempt to compete with Toys ‘R’ Us’ pop-up Express stores during the holiday shopping season since Wal-Mart’s pop-up units will concentrate on toys and electronics and will operate through December 31.

At the same time, ...

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Retail Demand Continues Steady Recovery, Some Pockets of Pain Persist - CoStar Group

Restaurant Growth Reported To Be Especially Strong, Power Centers Attracting Interest from Retailers, but Some in Market Question How Much Activity is Driven by Discounting

By Randyl Drummer

November 9, 2011

CoStar Group

With the holiday shopping season getting under way in earnest this month, recession-weary American consumers are setting aside their worries about stagnant U.S. employment, a soft housing picture and the debt crisis in Europe to go shopping. That's providing fuel for the slow-but-steady improvement in retail property fundamentals that has emerged in recent quarters.

Consumers rode out a slow-but-not-stalled economic expansion during the spring, and annualized GDP growth edged up in the third quarter, with lower interest rates beginning to have their intended effect -- encouraging purchases of durable goods like autos and stronger spending by consumers on home improvements, food and beverage and electronics, furniture and appliances, according to data presented at CoStar Group’s Third-Quarter 2011 Retail Review and Outlook.

"Retail spending started out with ‘needs’-based items like health care and general merchandise at Target and Wal-Mart, and it's now widened to include more of the ‘wants’ by consumers," said Senior Real Estate Strategist Suzanne Mulvee, who co-presented the quarterly review with Real Estate Economist Ryan McCullough.

Even as shopping centers and malls logged their ...

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TxDOT sign points way to Bass Pro Shops| sign, txdot, b - Pathfinder - Valley Morning Star

TxDOT sign points way to Bass Pro Shops| sign, txdot, b - Pathfinder - Valley Morning Star

FASB Lease Accounting Update: Will Lessors/Landlords be excluded?

Posted on Tue, Nov 01, 2011

Much has been written about the significant joint undertaking by FASB and IFRS to update lease accounting rules in the name of improved transparency. With real estate leases comprising a high percentage of all operating leases, the potential impact for the commercial real estate industry looms large, for landlords, tenants, brokers and property managers alike.

After taking significant public comment on its exposure draft published in August 2010, FASB agreed to reconsider its proposed guidance. The primary aspect of the draft changes redefined all operating leases as right-of-use assets (capital leases), thereby moving accounting from the operating statement to the balance sheet. The volume and nature of comments has pushed final guidance back to 2012.

However, in a recent Project Update published on FASB's website, FASB indicated that the two bodies have "tentatively decided that a lessor’s lease of investment property would not be within the scope of the receivable and residual approach. Instead, for such leases the lessor should continue to recognize the underlying asset and recognize lease income over the lease term."

The International Council of Shopping Centers (ICSC) is one of several industry organizations advocating for the commercial real estate industry's interests with regard to proposed lease accounting changes. ICSC summarized the decision made at FASB/IFRS' last meeting in thisOctober 27, 2011 news report:

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Commercial Real Estate News - October 2011

Click here to view the October Commercial Real Estate News from NAI Rio Grande Valley.

ULI - What’s Next? New Urban Land Institute Report Explores How Fundamental Societal Change Could Dramatically Affect Urban Land Use Through the End of the Decade

ULI - What’s Next? New Urban Land Institute Report Explores How Fundamental Societal Change Could Dramatically Affect Urban Land Use Through the End of the Decade