One of the most popular property types in commercial real estate are "triple-nets," also known as "NNN" deals. These are typically single-tenant retail properties leased to tenants with high credit ratings on "net, net, net" terms (hence the NNN acronym), meaning the tenant is responsible for real estate taxes, insurance, and all maintenance.
At first glance these deals appear to be the perfect investment. They are typically new or nearly new, have no management responsibilities, a long-term lease to a quality tenant, stable cash flow, attractive financing, and the unique tax benefits only real estate provides.
The advantages have fueled a tremendous growth in demand from investors on every level. They appeal to part-time investors looking for guaranteed income with no management responsibility, and they provide an attractive exit strategy for those with mature portfolios. As with any investment, there are many factors to consider in valuing and structuring the deal.
First, like frozen food, you "pay" for the convenience of no management duties and stable, long-term income in the form of lower returns than with a more hands-on, high-maintenance project. Prices start in the range of a 6% cap rate for the highest rated tenants, up to perhaps 8.5%–9% for lesser credit quality or those with short lease terms.
[Note: A cap rate is the percentage of return on the investment as if it were bought with all cash. The lower the cap rate, the higher the price. See this article: Deriving Your Cap Rate for more detail.]
Investors who use debt financing can produce leveraged returns in the 10% - 12% range. But as we will see, income is not the only determinant of value.
Second, and often overlooked, is the wide range of risk exposure for NNN properties, even those with investment grade credit ratings. Contrary to popular belief, these are not "risk-free" investments, and in fact require a level of understanding beyond that of more typical real estate investments.
Wednesday, April 6, 2011
Thursday, March 31, 2011
The Power of Global Reach
"REALTrac Online is truly an industry breakthrough, and something none of NAI’s competitors can match. The process management and reporting system assures consistency and reduces cycle time, adding significant value."
- Cindy Poggiogalle, The Pepsi Bottling Group
The world is at your doorstep – whether you’re in Toronto, Tokyo or Texarkana.
At NAI, our global market coverage is uniformly excellent. We have top-tier companies and deep-seated professionals in major and secondary markets. This level of coverage works exceptionally well for our clients because of the connections hardwired into our network, including standards of transaction management, information control and real estate technology that have always led the industry.
Best practices are shared throughout our network.
For more than a decade, NAI has gathered best practices by each industry specialty, codified these processes into our proprietary Strategic Transaction Administration and Reporting system (STARs), and trained our professionals using this global standard. STARs puts all the forms, processes and financial analysis to work for our clients, reducing cycle times up to 25%, cutting process costs, enhancing value and increasing speed to market.
Real-time information actionable inforamtion.
Because of our unique model, NAI has always put a premium on the early adoption of cutting-edge technology as a means of speeding communications, delivering the highest-quality services to clients and facilitating collaboration among our team. Our proprietary transaction management system, REALTrac Online, is recognized by the industry as one of the most significant technological innovations of the past 20 years. By combining the best people, processes and systems, the NAI network delivers proven results for our clients.
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.
Because of our proximity to the Mexico border, close ties to the business community in Mexico and a proven understanding of the unique economics of the U.S. - Mexico border area, NAI Rio Grande Valley is able to provide services to both international and domestic clientele.
Source: NAI Global
Wednesday, March 30, 2011
The Power of Connectivity
"When we need to get something done halfway around the world, our NAI Account Executive coordinates with the regional Managing Director to ensure that our objectives are met. Wherever our business takes us globally, NAI has that extra mile covered."
- Bob Burgholzer, Gillette
A difference in attitude.
Our Managed network is a union of best-in-class local offices and businesses that are entrepreneurial in spirit and always enterprising on behalf of the client. NAI is highly selective. Only the most successful companies are invited to join our network,and to remain as members, companies must continuously perform at the highest level. An entrepreneurial spirit is the norm,which means that our entire network is geared towards innovation and taking the initiative on behalf of the client. And because of our unique model, we're able to maximize speed, cooperation and integration between all points.
A difference in structure.
NAI is different by design. Because of the close strategic integration of NAI companies, relationships are tight-knit and communication is fluid between all partners. Uniquely, NAI employs a global management team of seasoned professionals who make sure that all NAI agents are trained to our network's global standards. These global directors, along with the client's dedicated transaction management team, guarantee premier quality service delivery on every assignment. Critical management staff also oversee each step of a transaction - from initiation through post-completion follow-up. This regional and project-based oversight guides transactions and clarifies critical issues such as currency, culture, politics and common practice in cross-border projects.
A difference in approach.
At, NAI, we've built much more than a network of unmatched local market knowledge, we've built a collaborative, process-driven enterprise to assure the highest level of consistency and quality at every touch point. Every client assignment is initiated with a detailed road map and project timeline, outlining key milestones and success factors. We then employ our proprietary online transaction management system to manage each project in real-time. This process enables our team to handle hundreds of projects, locally and globally, with equal efficiency and transparency. As a client, knowing the exact status of every ongoing project helps you empower your decision-making and achieve superior results.
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.
Because of our proximity to the Mexico border, close ties to the business community in Mexico and a proven understanding of the unique economics of the U.S. - Mexico border area, NAI Rio Grande Valley is able to provide services to both international and domestic clientele.
Source: NAI Global
Hispanic owned South Texas transportation January sales up 32% in January alone-
Monday, March 28th, 2011
Business Category is a Key Recession Recovery Statistic
Rio Grande Valley, Texas – Bucking the national epidemic of near-stagnant growth, McAllen, Texas was recently recognized as the first city in the United States to reach pre-recessionary levels and one of the few metropolitan areas to have positive job growth throughout the entire economic downtown. Nowhere is this more evident than in the transportation industry, which has traditionally served as a chief indicator of how other key industries are fairing since trucks carry goods to a wide range of markets, suppliers and manufacturers across the country
Mike’s Loading Service based in Edinburg, Texas reported its January sales were up 32% versus the previous year. “The rate of growth we’re seeing is really satisfying for our company and very positive for our industry,” says Mike Castillo, President of Mike’s Loading Service, Inc. in Edinburg. “Economic recovery for our area is tied to companies like Mikes Loading.
They are progressive and focused on growth and we support them”- said Dan Lawless- President, Chase Bank, Rio Grande Valley Region With sales of $56.3 million in 2009 and $56.7 million in 2010, Castillo’s brokerage first felt the effects of the pending recession in June 2008 when sales were off by 35%. The first quarter of 2011, however, is proving to be an entirely different story. “Sales are already up ...
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Tuesday, March 29, 2011
SBA Loans for Commercial Real Estate Refinancing
Monday, March 28th, 2011
Agency will begin accepting refinancing applications as of Feb. 28 for
small businesses facing maturing mortgages, balloon payments
Washington, D.C. – Small businesses facing maturity of commercial mortgages or balloon payments before Dec. 31, 2012, may be able to refinance their mortgage debt with a 504 loan from the U.S. Small Business Administration under a new, temporary program announced today.
The new refinancing loan is structured like SBA’s traditional 504, with borrowers committing at least 10 percent equity and working with third-party lending institutions and SBA-approved Certified Development Companies in the standard 50 percent/40 percent split. A key feature of the new program is that it does not require an expansion of the business in order to qualify.
SBA will begin accepting refinancing applications on Feb. 28. The program, authorized under the Small Business Jobs Act, will be in effect through Sept. 27, 2012.
“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” said SBA Administrator Karen Mills. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.”
The SBA initially will ...
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Article from the March 2011 Issue of Texas Border Business
The Risks & Benefits of Triple-Net (NNN) Properties
by Ray Alcorn
Risk is always present
In evaluating any NNN deal, be aware that all
Click here to read more
McAllen MSA Ranked Top 20 Strongest Metros in 2011 by Brookings Institute
March 2011 — MetroMonitor: Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas
McAllen Ranked top 20 strongest Metropolitan areas in recovery in the recession for average rank across a series of four indicators: employment change; unemployment rate change; gross metropolitan product change; and housing price index change.
As of the fourth quarter of 2010 (ending in December), the nation’s 100 largest metropolitan areas were seeing widespread and steady growth in economic output but only slow and inconsistent improvement in the labor market. Job growth was sluggish and unemployment rates, although lower than at the end of 2009 in most large metropolitan areas, remained very high. Housing market performance was mixed; house prices fell in nearly all large metropolitan areas, but the pace of foreclosures slowed. As always, metropolitan economic performance varied greatly among the 100 largest metropolitan areas.
Nearly all those whose economies have suffered the least rely substantially on government (e.g., Washington and several state capitals), health care (e.g., Baltimore and Pittsburgh), education (e.g., Pittsburgh and Austin), or oil and gas (Denver). The map above shows how the 100 largest metropolitan areas rank on a combination of four economic indicators: percent job change from the peak quarter to the fourth quarter of 2010, change in the unemployment rate from December 2007 to December 2010, percent change in economic output (gross metropolitan product) from the peak quarter to the fourth quarter of 2010, and percent change in an index of house prices from the peak quarter to the fourth quarter of 2010.
Click here to read entire report
View all interactive maps, click here
Monday, March 28, 2011
Census Figures Count: Growth All Around Us
Monday, March 28th, 2011
The numbers from the U.S. Census Bureau are out, confirming what we see before our eyes - growth is all around us. From Brownsville to Roma,there is absolutely no mistake that the Rio Grande Valley is building an infrastructure that will help this area become the vanguard for the United States.
The U.S. Census Bureau reported Hidalgo County grew from 569,769 to 774,769 residents representing a 35 percent increase during the last decade. Cameron County grew from 335,227 to 406,220, a 21 percent increase, while Willacy County grew from 20,082 to 22,134, a 10 percent increase. Starr County also reported a gain from 53,597 to 60,968, which is a 13 percent increase.
As the census data is being digested, Valley leaders are ...
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We've Been Busy!
View some our recent CLOSED deals by clicking on the below link.
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