Wednesday, December 28, 2011
Abu Dhabi’s Government Agreed to Buy Assets Valued at 16.8 Billion
Government Agreed to Buy Assets Valued at 16.8 Billion
The government will purchase 760 three-bedroom to five- bedroom homes in the Al Raha Beach development and retire 5 billion dirhams of debt related to infrastructure on Yas Island,Aldar said in a statement today. It will also buy 5.7 billion dirhams of assets in Abu Dhabi’s city center, known as the Central Market, and finance the completion of the district’s redevelopment.
Developers in the United Arab Emirates are struggling to pay down debts after the credit crisis caused property values to plummet and drove speculators out of the market. The statement was released after the Abu Dhabi market closed. Aldar gained 3.7 percent to 84 fils today, the biggest gain in about two months. The shares have fallen 31 percent in the past six months, while the Bloomberg EMEA Real Estate Indexhas lost 19 percent.
“This will have a positive sentiment in the market, leading investors to buy the stock aggressively,” said Musa Haddad, head trader at National Bank of Abu Dhabi PJSC’s asset management group said.
Wednesday, December 21, 2011
Intense Interest Among Developers in Urban Markets
NNN Lease Market News
"Investors have shown a willingness to pay aggressive caps for urban properties"
"There are markets that we're operating in that are not seeing enough of a premium in terms of what people will pay for new development [or] to start speculative new construction," said Doug Linde, president of Boston Properties, the nation's largest office landlord. The company recently completed two apartment projects adjacent to their office buildings in Washington and Boston of 335 units and 86 units, respectively, above retail space. Monthly rents start at roughly $3,000.
The intense interest among developers in apartment buildings reflects rising rents and falling vacancies. In the third quarter, the national vacancy rate dropped to 5.6%, down from 7.1% a year earlier and the lowest rate since 2006, according to Reis Inc. Average monthly rental rates hit $1,004 nationwide, up 2.4% from a year earlier.
More Americans have been opting to rent in recent years as the allure of owning a home has diminished, due in part to tight lending restrictions, falling prices and rising foreclosures. These forces are driving up apartment building values—to levels unseen since 2007, in some cases.
The rush into apartment building development is raising the specter of a bubble, particularly in urban markets such as Washington and New York. While more than 173,000 units are expected to be started this year, 225,000 and 280,000 starts are expected nationwide in 2012 and 2013, respectively, according to Zelman & Associates. That still is less than 2005, when starts were at 352,000.
The recent spike in development is why some companies aren't joining the rush into multifamily projects. "I think there is a real possibility that anyone investing in multifamily right now is getting in toward the top of the market," said Doug Donatelli, CEO of First Potomac Realty Trust, which owns office, business parks and industrial properties.
Major real-estate companies generally stick to what they know best. Those who have strayed into unfamiliar businesses have had mixed results.
For example, analysts criticized Vornado Realty Trust in 1997 for leading a venture that purchased the nation's largest supplier of cold-storage space in a deal valued at close to $1 billion. Although Vornado eventually made a profit on the deal, if it would have purchased New York office buildings instead of cold storage "it would have done unbelievably better," said Michael Knott, an analyst at Green Street Advisors.
More recently, suburban shopping center landlord Kimco Realty Corp. is retreating from a $1.2 billion strategy to invest in mixed-use office and retail properties in urban markets. The company embarked on the strategy in 2007 to chase higher yields when prices for suburban shopping centers got too high, but realized that it didn't have the expertise in downtown development to make it a big success.
Apartments require a far different skill set than retail or offices. Turnover is high, so landlords constantly have to adjust prices to fill empty units. Tenants can easily be lured away by something newer, better located or offering more modern amenities. Landlords also have to worry about the economy worsening—plenty of apartment owners had to reduce rents after the financial crisis—and the for-sale market making a comeback. Investors have shown a willingness to pay aggressive caps for urban properties. An increase in mixed use residential condominiums brought about by population movement toward the urban core and a pause in expansion by national retailers has contributed to the wide-ranging demand for NNN urban properties. Coming on the heels of the recession and the ensuing across-the-board hike in cap rates, this move to dense, high traffic urban locations signals where investors want to be over the next decade.
Recently identified as a top niche investment trend by the Urban Land Institute (ULI), mixed-use urban projects have drawn retailers and investors to this asset type even in the current market cycle. Driven by a desire to spend less time in traffic, live in a smaller footprint and work and play within an urban atmosphere, aging boomers and Gen XYZers alike are leaving the edge and making their way back to the city. Developers have capitalized on this trend by coupling high-rise condominium living with easily accessible ground floor retail space. The convenience of these on-hand amenities makes for an attractive lifestyle for local residents and nearby office workers.
NNN Investment Market 8 Percent Returns
NNN Lease Market News
REITs have outperformed other investment areas in general, but those pouring money into cell phone towers, cold storage warehouses, or transportation and energy infrastructure have thrived. The Dow Jones U.S. Specialty REIT index has returned 7.94 percent compared to the 3.32 percent returns posted by the overall REIT index.
Investors are buying commercial property as they search for higher yields than they may find on other assets, including some fixed-income securities. Buyers have flocked to high-quality real estate, such as office towers in major coastal cities, amid increasing tenant demand.
REITs yield 8 percent returns
Real estate investment trusts that invest outside of the four major categories of office, retail, residential and industrial property have been especially successful, according to the New York Times.
REITs have outperformed other investment areas in general, but those pouring money into cell phone towers, cold storage warehouses, or transportation and energy infrastructure have thrived. The Dow Jones U.S. Specialty REIT index has returned 7.94 percent compared to the 3.32 percent returns posted by the overall REIT index.
Investors are buying commercial property as they search for higher yields than they may find on other assets, including some fixed-income securities. Buyers have flocked to high-quality real estate, such as office towers in major coastal cities, amid increasing tenant demand.
Monday, December 19, 2011
NNN Lease Midwest Market Report
NNN Lease Market News
The Midwest Market encompasses a varied set of states that mainly include: Missouri, Kansas, Minnesota, Illinois, Kentucky, Ohio, Indiana, Iowa and Wisconsin. The major cities and metro areas that highlight this market are St Louis, Kansas City, Indianapolis, Minneapolis/St Paul, Madison, Kansas City, Des Moines, Cincinnati and Columbus. Chicago although considered a cornerstone of the region acts more like one of the major metropolitan areas behind New York, Los Angeles, Miami, San Francisco and DC. It is the more representative of the primary market in trends and pricing even though it is a hub for retail commercial real estate and reporting, its’ behavior is an exception to the majority of Midwest’s NNN lease market.
As a whole, the Midwest sector is underserved and largely untapped in the NNN leased niche. There are virtually no firms specifically working on the NNN assets for this market. The majority of the investment grade listings are picked up by out of state brokers who may not be cognizant of the intricacies of the Midwest investor mindset and region particulars.
Read the full report here.
What does it cost to do deals in South Korea Markets
NNN Lease Market News
What does it cost to do deals in South Korea? For Lone Star Funds, a Dallas-based buyout firm, almost $3 billion.
While Lone Star still stands to double its money from the eight-year investment in Korea Exchange Bank, its experience will undermine the government’s ability to dispose of a $3.8 billion stake in Woori Finance Holdings Co. (053000), CLSA Asia-Pacific Markets said. It also furthers the perception that South Korea, where companies sell at a discount to the rest of Asia because of concern over corporate governance and North Korean aggression, is hostile to foreigners, Market Force Co.’s James Rooney said.
“Investors would look at this case as a kind of horror show, where every kind of risk that is hated by professional investors seemed to show up and create a massive distortion of intelligent markets,” said Rooney, the consulting firm’s Seoul- based chief executive officer and a member of the investment committee at Macquarie Korea Opportunities Management. “This case has made the prospects much, much worse for Woori.”
In November 2006, as regulators investigated whether Korea Exchange Bank’s financial strength was deliberately understated to let Lone Star buy the stake, a sale to Kookmin Bank (105560), South Korea’s largest bank, collapsed. London-based HSBC, Europe’s biggest bank by market value, dropped its $6.3 billion proposal after regulators held the deal in limbo for more than a year.
With politicians using Lone Star’s windfall to criticize the buyout fund’s investment strategy in South Korea and sway public opinion, foreign investors may now stay out of the bidding forWoori Finance and undermine the government’s effort to sell the nation’s largest financial company by assets, according to Shaun Cochran, head of Korea research at CLSA Asia- Pacific Markets in Seoul.
Since South Korea first announced its plan to dispose of Woori Finance in July 2010, the bank has lost about a third of its market value, or about $2 billion, as of last week.
Friday, December 16, 2011
Good News For Real Estate Market In 2012
NNN Lease Market News
Good News For Real Estate Prices In 2012
A study released by Deloitte Real Estate Services says the U.S. commercial real estate market “appears to be on a gradual but uneven path to recovery with increased capital availability, transactions and improved fundamentals.” However, “a potential pause in recovery momentum” exists due to the European Debt Crisis, continued high unemployment rates in the U.S. and the high rate of maturing debt levels.
The Associated General Contractors of America released a study that says private construction spending increased for the first three quarters of 2011, but investments in the public sector continue to rapidly decline.
The National Association of Realtors reports pent up demand exists “from buyers who normally would have entered the market in recent years,” and that homeowner default rates now are lower than at any time in history.
For now, a 30-year fixed-rate mortgage remains at less than 4 percent, but a forecast by New York based investment banking firm Keefe, Bruyette and Woods, Inc. says the rate of 10-year treasury bonds should rise in 2012 because the Federal Reserve will not purchase enough mortgage backed securities “to keep mortgage rates from rising to 4.7 percent by the fourth quarter of 2012.”
What does all of this information mean? According to BusinessWeek, “…even the worst hit markets will begin to see improvement (in) 2012.”
Friday, December 2, 2011
Own a Piece of King Kong's Favorite Skyscraper Thought REIT
NNN Lease Market News
The public may get an opportunity to own a piece of King Kong's favorite skyscraper.
The Malkin family of New York, which currently controls the 102-story landmark, filed papers with the Securities and Exchange Commission Tuesday saying that it has "embarked on a course of action" that could result in the skyscraper being included in a newly formed real- estate investment trust.
Lately the Manhattan office market has been under a cloud due to economic uncertainty and cutbacks in the financial services industry. But the Empire State Building has outperformed comparable properties, thanks in part to a recently completed $550 million upgrade.
The building was valued in the summer at $1.65 billion, when the Malkin family refinanced the property. The building's net annual income is $63 million, according to Commercial Mortgage Alert.
Developed in the early 1930s by group of investors led by tycoon John Raskob, the Empire State Building hit the market during the Depression and sat mostly empty for years. Gradually, though, the building filled up with hundreds of tenants and became a Hollywood darling featured in movies such as "King Kong" and "Sleepless in Seattle."
A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.
REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges.
Tuesday, November 22, 2011
Toll Brothers is Acquiring Seattle Builder CamWest Development
NNN Lease Market News
Toll Brothers to Buy Seattle Builder
It is Toll's first acquisition since its 2005 purchase of Landstar Homes in Florida and its first new state since the housing market sank.
While the Seattle market weakened during the downturn, prices have stabilized around 2004-2005 values and some neighborhoods are even seeing modest price increases, said David Bell, managing broker with RE/MAX Metro in downtown Seattle. The market didn't see a construction glut during the boom and has strong employers in the software and biotech industries, a combination that has buffered it from the foreclosure crisis that has depressed values by 30% or more nationwide.
Just one in every 856 of the Seattle area's households received a foreclosure filing in October, according to RealtyTrac. That is compared with one in every 563 housing units nationwide and one in every 143 in Stockton, Calif., one of the nation's biggest boom-to-bust markets.
Toll has been looking at the Seattle market for about a decade, but it has been tough to find suitable sites in the land-constrained market with tough environmental regulations for home construction, Toll Chief Executive Douglas C. Yearley Jr. said in an interview. http://online.wsj.com
You get value on many levels when you become a Toll Brothers homeowner.
Toll Brothers to Buy Seattle Builder
It is Toll's first acquisition since its 2005 purchase of Landstar Homes in Florida and its first new state since the housing market sank.
While the Seattle market weakened during the downturn, prices have stabilized around 2004-2005 values and some neighborhoods are even seeing modest price increases, said David Bell, managing broker with RE/MAX Metro in downtown Seattle. The market didn't see a construction glut during the boom and has strong employers in the software and biotech industries, a combination that has buffered it from the foreclosure crisis that has depressed values by 30% or more nationwide.
Just one in every 856 of the Seattle area's households received a foreclosure filing in October, according to RealtyTrac. That is compared with one in every 563 housing units nationwide and one in every 143 in Stockton, Calif., one of the nation's biggest boom-to-bust markets.
Toll has been looking at the Seattle market for about a decade, but it has been tough to find suitable sites in the land-constrained market with tough environmental regulations for home construction, Toll Chief Executive Douglas C. Yearley Jr. said in an interview. http://online.wsj.com
You get value on many levels when you become a Toll Brothers homeowner.
NNN Market Loan Prices Rise in October
NNN Lease Market News
Commercial Real Estate Loan Prices Rise in October
In October, DebtX priced 52,806 CRE loans with a $628.4 billion aggregate principal balance. These loans, which collateralize 647 US CMBS trusts, each received a DXMark(R), a price based on 10 years of data from billions of dollars in loan sales executed by DebtX, the largest marketplace for loan sales. Access to individual DXMark prices is available through the BLOOMBERG PROFESSIONAL(R) Service. Type DXMKfor more information.
DebtX's CMBS loan pricing analysis is part of DXMarket Datasm, a subscription service that provides loan buyers with insight about transactions at www.debtx.com . DXMarket Datasm is available to registered DebtX buyers and includes six components: Non-Performing Loan Sale Prices, Bank Watch, Secondary Loan Market Commentary, CMBS Loan Collateral Prices, Secondary Loan Market Liquidity and CRE Capital Markets Observations. http://www.marketwatch.com/
Over the last 12 months high quality assets have been in strong demand;drugs store such “Walgreens” being the perfect example. As a result of this strong demand, cap rates for high quality assets have been driven down to the low/mid 6% range. Investors are now looking for higher returns. Washington D.C., New York, Boston, Chicago, Dallas, L.A and San Francisco are all popular locations for acquiring net leased assets and urban infill locations with good demographics are highly sought after. www.calkain.com
Over the last 12 months high quality assets have been in strong demand;drugs store such “Walgreens” being the perfect example. As a result of this strong demand, cap rates for high quality assets have been driven down to the low/mid 6% range. Investors are now looking for higher returns. Washington D.C., New York, Boston, Chicago, Dallas, L.A and San Francisco are all popular locations for acquiring net leased assets and urban infill locations with good demographics are highly sought after. www.calkain.com
Monday, November 21, 2011
New York Real Estate Market is Shrinking
NNN Lease Market News
Manhattan Luxury-Home Supply Dwindles
Jason Haber, who runs a New York real estate brokerage firm, is struggling to find apartments to show a client who’s in the market for a Manhattan home priced around $8 million. “That’s not something you would do if the market was flush with high-end inventory,” said Haber, co-founder and chief executive officer of Rubicon. “That’s a sign of the times. This is a ready, willing and able buyer and we can’t find the product for him.
There were 832 homes on the market with asking prices of at least $5 million last month, compared with 862 in October 2010, 917 in 2009 and 909 in 2008, StreetEasy data show. In October 2007, near the real estate market’s peak, there were 588 listings.
Prices haven’t returned to peak levels. The third-quarter median price in the top 10 percent of the market was $4.17 million, down 16 percent from the high of $4.99 million in the first three months of 2008, according to Miller.
http://www.bloomberg.com/news
Friday, November 18, 2011
NNN Walgreen in Texas Close for $7.3 million
NNN Lease Market News
Net leased Walgreens sells for $7.3 million in McKinney, Texas
McKINNEY, Texas - In a quick-moving, all-cash close, a private family trust from California has paid $7.3 million for a 14,820-square-foot store, net leased until 2033 to Walgreens.
Jim Casale, principal in the San Diego office of Lee & Associates, represented the buyers. Brad and Gavin Kam of Net Lease Realty Advisors in Dallas marketed the property for the sellers, JK 720 Custer LLC. The Walgreen build-to-suit delivered in 2008 at 8996 Stacy Rd. in the 2,500-acre Craig Ranch. The Deerfield, Ill.-based pharmacy chain's long-term lease includes options.
http://dallasrealestate.citybizlist.com
http://dallasrealestate.citybizlist.com
Monday, November 14, 2011
European Banks Will Sell More (NNN) Distressed Commercial Properties
NNN Lease Market News
Europe Is Seen as Ripe Market for Distressed Property Loan Sales by Banks
European banks will be forced to sell more distressed commercial property loans in the coming year, as more borrowers default, said panelists at the Bloomberg Commercial Real Estate Summit.
The U.S. commercial real estate market slowed in the third quarter as the sputtering economy and a pullback in debt financing limited deals. A total of $49.8 billion of commercial property changed hands in the period, down from $58.5 billion in the previous three months, according to Real Capital Analytics Inc. in New York. The 15 percent decline is the second-biggest since the first quarter of 2009, the real estate research firm’s data show.
Dune Real Estate Partners LP expects investment opportunities in the U.S. next year, said CEO Daniel Neidich. Most investors are focusing on major coastal cities such as New York, Washington and San Francisco, according to Leslie Wohlman Himmel, managing partner at Himmel & Meringoff Properties, a New York investment firm that owns and operates more than 2 million square feet (186,000 square meters) of office and retail space.
Tuesday, November 8, 2011
Eight Triple Net (NNN) Leased Building Industrial Park Sold
NNN Lease Market News
Triple Net Leased Trinity Ridge Business Center Sold
Dalfen America Corp. announced today the acquisition of Trinity Ridge Business Center.
Built between 1998 and 2007, this eight-building industrial park totals 234,000 square feet and is located in Cordova, Tennessee, an affluent suburb of Memphis.
In 2007, Trinity Ridge Business Center was acquired by DBSI Inc. for $22.9 million. The property was foreclosed on last year and the loan servicer, LNR Partners, LLC, sold the property to Dalfen America Corp for $7.2 million.
This property is the latest acquisition made by DAC's most recent value-added industrial fund, the firm's 17th real estate fund. Since its closing in February of this year, DAC's fund has acquired close to 1 million square feet of institutional quality multi-tenanted industrial properties and mortgage notes in select metropolitan markets across the United States.
"We continue to see areas of opportunity in the current real estate market and we believe this transaction offers a unique opportunity for Dalfen America Corp. to add value and generate superior returns for our investors," said Sean Dalfen, Dalfen America Corp.'s Executive Managing Director.
Dalfen is confident that the firm is uniquely positioned to capitalize on the steady flow of overleveraged assets being sold by lenders both on and off market because of its cash position, ability to make decisions quickly, and reputation for fair dealings.
Friday, November 4, 2011
Net Lease Grocery Stores are a Major Player in the NNN Market
NNN Lease Market News
Location is Central to a Grocer's Success
Net lease grocery stores are a major player in the NNN market. Their focus on staple products and central locations are the definition of a stable asset. While other retailers with large foot prints couldn't weather the recession (Circuit City) net lease grocery stores made it through relatively unscathed.
Like all real estate, location is central to a grocer’s success. However, unlike other sectors such as office or traditional retail, there it not a strong temptation to overbuild. Grocery stores inhabit a very stable area of the consumer’s basket. A recession may force customers to cut back on casual dining and weekend shopping but milk and bread will still be bought.
For these reasons cap rates for grocery stores have recently compressed at a faster rate than the rest of the net lease market. Investors are demanding stable, recession proof assets and grocery stores fit this bill perfectly.
Read the full report here.
Thursday, October 27, 2011
NNN Lease Market: New Tricks for NNN Lease Mall Investor
NNN Lease Market: New Tricks for NNN Lease Mall Investor: NNN Lease Market News Goodbye to Circuit Citys and Old Navys; Hello, Gun Ranges, Aquariums, Go-Carts Sobered by store closings and the r...
New Tricks for NNN Lease Mall Investor
NNN Lease Market News
Goodbye to Circuit Citys and Old Navys; Hello, Gun Ranges, Aquariums, Go-Carts
Mall giant Simon Property Group Inc. opened an aquarium in July at its Grapevine Mills mall near Dallas. Real-estate brokerage Jones Lang LaSalle Inc. put a fencing academy in a former Old Navy store in Florida's Tallahassee Mall, and a community theater on the lower level of a former Boscov's store in Harrisburg,Pa.
Nontraditional tenants, in many cases, though, don't pay as high a rent as major chains would pay. What's more, nonretail tenants often don't pay percentage rents, a form of bonus rent that retailers pay from a small percentage of their sales when they exceed a certain threshold.
Even top performing mall companies—like Simon, which reported a 19% rise in earnings Tuesday—are looking at restaurants, entertainment and other nonretail uses as a hedge against the drain from online shopping. Glimcher Realty Trust purposefully filled 25% of its upscale Scottsdale Quarter mall near Phoenix with restaurants such as Stingray Sushi and services like Drybar, a salon that specializes in blow drying women's hair. "She can't go out to lunch and have a salad and a glass of wine with her girlfriends online," Glimcher Chairman and CEO Michael Glimcher said, referring to the mall industry's coveted female shoppers.
Struggling shopping centers, like the Tallahassee and Harrisburg malls, meanwhile, are signing nonretail tenants because no one else is lining up for the space. But adding a tenant with limited potential to bring shoppers to the rest of the center—like classrooms or a church—often isn't popular with existing tenants. The move can be seen as giving up on the center as a retail venue.
Wednesday, October 26, 2011
Two Triple Net Lease (NNN) Dollar General Sold
NNN Lease Market News
Some of these are even so-called triple net lease (NNN) properties wherein the tenant also pays for maintenance, insurance and taxes on the property. Opportunities for these buys are increasing and investors are increasing their holdings as they begin to realize the benefits of these properties as safe long-term real estate investments.
Two net lease investment properties occupied by Dollar General (NYSE: DG) in the Virginia towns of Madison and Ferrum have sold for $2.54 million.
The two properties were recently developed as part of Dollar General's built-to-suit program, and the stores have brand new 15-year triple net leases.
Calkain's Andrew Fallon, Associate, facilitated the transaction, providing exclusive representation to the Seller, who developed the assets. The purchaser was a regional real estate development and management company based in the Northeast.
"The dollar store companies, including Dollar General, are relocating to free-standing stores in existing markets and opening new stores in new markets," said Fallon.
Investors are now looking to single tenant net lease properties to produce steady profits as the commercial real estate market attempts a recovery from the recession. Net lease properties trend toward higher-quality assets and creditworthy renters who often agree to graduated increases in rent over long periods of time.
Some of these are even so-called triple net lease (NNN) properties wherein the tenant also pays for maintenance, insurance and taxes on the property. Opportunities for these buys are increasing and investors are increasing their holdings as they begin to realize the benefits of these properties as safe long-term real estate investments.
Dollar General Corporation is the nation's largest small-box discount retailer. We make shopping for everyday needs simpler and hassle-free by offering a carefully edited assortment of the most popular brands at low everyday prices in small, convenient locations. Dollar General ranks among the largest retailers of top-quality brands made by America's most-trusted manufacturers, such as Procter & Gamble, Kimberly Clark, Unilever, Kellogg's, General Mills and Nabisco.
Friday, October 21, 2011
D.C. Worst Performance for Lease Office Market
The Washington region's office market in the third quarter registered its worst performance since late 2009, a sharp contrast to a boom the area saw throughout 2010.Now owners are adjusting to the likelihood that the public sector and its sprawling support system in the private sector will halt its growth in coming years—or even shrink.
"For us, it'll mean a relatively flat market, which we're not used to," said Douglas Donatelli, chief executive of First Potomac Realty Trust, a large office landlord in the region. "We're used to a market that absorbs space."
The federal government is by far the largest occupier of space in the region. The General Services Administration alone, which handles the bulk of federal leasing, accounts for 15.3% of the privately owned office market, according to brokerage CBRE Group Inc. Washington, by contrast, was the envy of landlords in most other cities through much of the recovery. Even when times were rough after the economy turned in 2008, Washington managed to escape with fewer scars than most other cities—likely aided by increased federal spending—and then roared back to be the best-performing office market in 2010.
In the first half of the year, investors were paying up for office buildings at values above those reached in the market's prior peak of 2007. For example, Beacon Capital Partners sold a 680,000-square-foot office building known as Market Square to Wells Real Estate Investment Trust II in March for a record $905 a square foot. The recovery in the Washington D.C. metro office market is expected to continue at a slow pace throughout the remainder of 2011 and into 2012.
Monday, October 10, 2011
what you Need to know about (NNN) Net Leased Properties
NNN Lease Market News
(NNN) Net Lease 101
Many investors are looking for a safe place to put their money with the wild fluctuations in the financial market. Stable, predictable investment vehicles are increasingly hard to find, but smart investors do have choices. One of the better choices is to invest in single-tenant, (NNN) net leased properties, which many investors also call a corporate bond combined with real estate investments that still make sense today.
Here's what you need to know about single-tenant, (NNN) net leased properties:
What is a single-tenant, (NNN) net leased investment?
A single-tenant, (NNN) net-leased investment is typically a freestanding office, retail, or industrial building that is leased and occupied by one user or one company. Typically the tenant has committed to a long-term lease - usually longer than 10 years, and as long as 25 years with increasing rent over the lease term.
What is a (NNN) net lease?
There are different types of leases for commercial property in the U.S. The two most common leases are full-service leases and net leases.
A full-service lease means that the tenant is paying one base amount to the landlord/owner to occupy the space and the owner pays all the expenses related to the building including insurance and property taxes. With a full-service lease, the landlord/owner also is responsible for all maintenance related to the building. For example, if a thunderstorm damages the roof, the landlord/owner must pay for the repairs.
In comparison, a tenant with a (NNN) net lease is responsible for paying rent plus some or all of the operating expenses of the building such as taxes, insurance premiums, repairs, and utilities. Depending on how the leases are structured, they can be net-net leases or NNN-net-leases. Specifically, in the case of a (NNN) net lease, also known as NNN leases, the tenant agrees to pay all of the building's operating expenses, real estate taxes and insurance.
How are single-tenant, net leased investments different from multi-tenant buildings?
Multi-tenant buildings have more than one tenant, and as a result, owners and landlords must juggle multiple leases that begin and end at different times. These leases are rarely longer than seven years. That means that the building's financial performance is vulnerable to the ups and downs of the market.
Many (NNN) net-lease investors have previously owned other types of real estate but are looking for an investment that requires less maintenance and supervision. For example, many apartment investors end up selling their high-maintenance properties and then reinvesting the sale proceeds in single-tenant, net-leased retail properties, as do many land owners who have previously never received any income or tax benefits from their property.
Who can invest in single-tenant, net leased properties?
Net leased properties are appealing to a wide variety of buyers, from high net worth individuals to partnerships to large institutional investors like real estate investment trusts, life insurance companies and pension funds. (NNN) Net leased properties also are very attractive to investors who need to do 1031 tax-deferred exchanges, or 1031 exchanges for short.
What are the benefits of investing in single-tenant, (NNN) net leased properties?
Many people consider single-tenant, net-leased properties as bond-like investments because of their stable, predictable returns. Because tenants commit to long-term leases, there's very little re-leasing risk. Moreover, single-tenant, net-leased investments can be tailored to an investor's risk-reward expectations by choosing tenants with different credit profiles. For example, some tenants are rated by national credit ratings agencies while other tenants have only their previous financial performance to recommend them.
What are the risks related to investing in single-tenant, net-leased properties?
While there are very few risks related to investing in single-tenant, net leased properties, tenants with non-investment grade credit profiles offer higher levels of risk. But that risk typically provides higher returns as well. And investors always need to think about the "re-leaseability" of a property if the net-tenant were to vacate the space.
How are single-tenant, (NNN) net leased assets valued?
Unlike traditional real estate investments whose valued is determined exclusively by the real estate itself, a single-tenant, net leased property's value is determined by a combination of factors including the tenant's credit, the length of the lease and rental escalations over the term, and, last but not least, the real estate. In markets where the real estate experiences wide valuation swings, a single-tenant, net-leased property will maintain its value because of its bond-like, long-term lease and the credit tenant guaranty for the lease.
When is the best time to invest in a single-tenant, (NNN) net lease property?
Net-leased properties are like all-weather tires. They are good investments in both good and bad economic times and in hot and cold real estate markets. Here's why: a single-tenant net lease is guaranteed by a long-term lease at pre-set rental rates. As an owner, you know exactly who will be a tenant in your building, how long that tenant will be there and exactly how much rent they will pay you. That means you will derive a steady income from your investment, regardless of how the economy or real estate market is performing.
http://www.calkian.com/
(NNN) Net Lease 101
Many investors are looking for a safe place to put their money with the wild fluctuations in the financial market. Stable, predictable investment vehicles are increasingly hard to find, but smart investors do have choices. One of the better choices is to invest in single-tenant, (NNN) net leased properties, which many investors also call a corporate bond combined with real estate investments that still make sense today.
Here's what you need to know about single-tenant, (NNN) net leased properties:
What is a single-tenant, (NNN) net leased investment?
A single-tenant, (NNN) net-leased investment is typically a freestanding office, retail, or industrial building that is leased and occupied by one user or one company. Typically the tenant has committed to a long-term lease - usually longer than 10 years, and as long as 25 years with increasing rent over the lease term.
What is a (NNN) net lease?
There are different types of leases for commercial property in the U.S. The two most common leases are full-service leases and net leases.
A full-service lease means that the tenant is paying one base amount to the landlord/owner to occupy the space and the owner pays all the expenses related to the building including insurance and property taxes. With a full-service lease, the landlord/owner also is responsible for all maintenance related to the building. For example, if a thunderstorm damages the roof, the landlord/owner must pay for the repairs.
In comparison, a tenant with a (NNN) net lease is responsible for paying rent plus some or all of the operating expenses of the building such as taxes, insurance premiums, repairs, and utilities. Depending on how the leases are structured, they can be net-net leases or NNN-net-leases. Specifically, in the case of a (NNN) net lease, also known as NNN leases, the tenant agrees to pay all of the building's operating expenses, real estate taxes and insurance.
How are single-tenant, net leased investments different from multi-tenant buildings?
Multi-tenant buildings have more than one tenant, and as a result, owners and landlords must juggle multiple leases that begin and end at different times. These leases are rarely longer than seven years. That means that the building's financial performance is vulnerable to the ups and downs of the market.
Many (NNN) net-lease investors have previously owned other types of real estate but are looking for an investment that requires less maintenance and supervision. For example, many apartment investors end up selling their high-maintenance properties and then reinvesting the sale proceeds in single-tenant, net-leased retail properties, as do many land owners who have previously never received any income or tax benefits from their property.
Who can invest in single-tenant, net leased properties?
Net leased properties are appealing to a wide variety of buyers, from high net worth individuals to partnerships to large institutional investors like real estate investment trusts, life insurance companies and pension funds. (NNN) Net leased properties also are very attractive to investors who need to do 1031 tax-deferred exchanges, or 1031 exchanges for short.
What are the benefits of investing in single-tenant, (NNN) net leased properties?
Many people consider single-tenant, net-leased properties as bond-like investments because of their stable, predictable returns. Because tenants commit to long-term leases, there's very little re-leasing risk. Moreover, single-tenant, net-leased investments can be tailored to an investor's risk-reward expectations by choosing tenants with different credit profiles. For example, some tenants are rated by national credit ratings agencies while other tenants have only their previous financial performance to recommend them.
What are the risks related to investing in single-tenant, net-leased properties?
While there are very few risks related to investing in single-tenant, net leased properties, tenants with non-investment grade credit profiles offer higher levels of risk. But that risk typically provides higher returns as well. And investors always need to think about the "re-leaseability" of a property if the net-tenant were to vacate the space.
How are single-tenant, (NNN) net leased assets valued?
Unlike traditional real estate investments whose valued is determined exclusively by the real estate itself, a single-tenant, net leased property's value is determined by a combination of factors including the tenant's credit, the length of the lease and rental escalations over the term, and, last but not least, the real estate. In markets where the real estate experiences wide valuation swings, a single-tenant, net-leased property will maintain its value because of its bond-like, long-term lease and the credit tenant guaranty for the lease.
When is the best time to invest in a single-tenant, (NNN) net lease property?
Net-leased properties are like all-weather tires. They are good investments in both good and bad economic times and in hot and cold real estate markets. Here's why: a single-tenant net lease is guaranteed by a long-term lease at pre-set rental rates. As an owner, you know exactly who will be a tenant in your building, how long that tenant will be there and exactly how much rent they will pay you. That means you will derive a steady income from your investment, regardless of how the economy or real estate market is performing.
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