Net Lease Investors Anticipate Opportunities in Commercial Real Estate in 2013

NNN Lease Market 


NNN Investors Anticipate Opportunities in Commercial Real Estate in 2013

According to surveyed participants, yields have compressed too much for well-leased strip shopping centers that some are considering buying value-add in great locations due to a lack of new supply. For power centers, challenges mainly stem from rising Internet retail sales, merchant consolidations, and an inability to easily shrink into urban streetscapes.

In the fourth quarter of 2012, the average overall cap rate, the initial return anticipated on an acquisition and a reflection of an investment's anticipated ownership risk, decreased in 24 of the surveyed markets, held steady in seven, and increased in just one of them. The overall cap rate shifts remain irregular with tech office markets (i.e. San Francisco) and the warehouse sector both showing some of the steepest declines. The national warehouse market's cap rate compression, where the average overall cap rate declined 40 basis points, reflects the optimistic outlook held by most surveyed investors.

The average overall cap rate declined again in the Survey's national Central Business District (CBD) office market, marking nearly ten instances of quarterly declines since the first quarter of 2010. Moreover, the current average of 6.70% is the lowest reported for this market since the second quarter of 2008. Due to this cap rate compression, some Survey participants are taking time to identify CBD assets to sell – while others remain in search of select buying opportunities.

In the apartment sector, surveyed participants believe market conditions continue to favor sellers, but some investors sense that rents may have peaked for now and that certain markets have become overpriced. In addition, investors remain attentive to the near-term impact of new construction. Consequently, this market's average initial-year market rent change rate dipped for the second consecutive quarter, suggesting less upside in this market. 

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Read more here: http://www.sacbee.com/2012/12/19/5064514/investors-anticipate-opportunities.html#storylink=cpy

http://www.sacbee.com/2012/12/19/5064514/investors-anticipate-opportunities.html

NNN Lease Market is Overly Pupular

NNN Lease Market News

Single-Tenant Real Estate Market is Overly Popular

Although the single-tenant real estate market is overly popular, who or what in our industry is actually thriving in this period of a declining cap rate yield curve is rarely discussed.

In 2009, I wrote an article about the apparent high rate of attrition in the net lease brokerage community. Brokers couldn’t afford to be brokers, developers couldn’t develop, tenants shut down plans for new stores and closed existing locations. So what happened to everyone that hung in there and stuck it out? The cream has risen to the top. Developers of single tenant properties that stuck to what they knew, maintained and fostered existing relationships, and made people aware that they weren’t going anywhere fared extremely well when it became time to start building again. They had more opportunities to purchase land for new buildings or redeveloped vacant buildings.

The development team may have become a little smaller with a lot more multitasking within their ranks, but what it made them more efficient service providers. Developers realized that collective thinking and pooled efforts of fewer people made each project more manageable for any specific property. Developers found that scale was important and it was unique to each property.

www.calkain.com 

Net Lease Investors Can't Get Enough High-Yielding REITs

NNN Lease Market News

Desperate for income, investors can't get enough high-yielding REITs and Wall Street is rushing to supply them. Companies are lining up to convert into REITs, a step that requires approval from the Internal Revenue Service.

Prisons, cell towers and golf courses were turned into REITs in the late 1990s, Mr. Westphal says with "pretty dreadful" results that in some cases produced losses of 90% or more.

So the market is changing and investors should temper their expectations accordingly.

While owning REITs is a good idea, panic buying isn't. Many investors are dumping money-market funds or bond funds and replacing them with higher-yielding REITs, says Morningstar analyst MichaelRawson. But REITs aren't bonds; the FTSE NAREIT Equity REITs Index, a benchmark of more than 120 of these stocks, lost 37.7% in 2008, when U.S. Treasury bonds had a positive 13.7% return.

http://online.wsj.com/home-page

UPREITS: TAX-DRIVEN CONVERSIONS FOR PROPERTY OWNERS

One of the more under-discussed aspects of the REIT is how it can benefit a seller of real estate. By contributing a property to a REIT you can achieve many of the same benefits associated with a §1031 exchange including deferral of gain recognition not to mention several other potential advantages. For the owner looking to monetize their investment in a tax advantaged manner with the possibility of additional upside this option deserves some additional examination. 

Click here for more Information about REIT 

www.calkain.com

The Marketplace Views Ground Leases as a Very Secure Type of Investment

NNN Lease Market News

Andrew Fallon, assistant vice president at Calkain Cos.

Market values of land alone logically come in somewhat below what ownership of both land and improvements would fetch. And buyers just as logically expect a return premium for full ownership relative to ground leases.

Hence the historic differential in cap rates between ground leases and outright trades of land and net leased structures is typically in the range of 50 to 100 basis points depending on location, tenant credit, lease term and structure and related factors, notes active net lease investment broker Andrew Fallon, assistant vice president with specialty advisor Calkain Cos.

Well-positioned ground leases in major markets tend to trade at cap rates in the vicinity of 6 percent or a bit below these days, compared to roughly 6.5 to 7 for land and improvements subject to net leases. One potentially exploitable factor likely to generate outsize returns for the savvy small-cap investor is that full ownership of both land and improvements reverts to the landowner when the lease terminates.

Hence a forward-looking investor able to track down and land a replacement tenant (ideally with minimal retrofitting expenses) might be able to essentially secure ownership of a functional structure sooner rather than later – without really paying for it. Another strategic approach here is to actively trade in ground leases, insightfully buying and selling based on timing of built-in rental-rate escalations.

And when an existing tenant does opt to exercise renewal options again and again, the more typical passive high-net-worth individual playing this space today still owns land that should retain value throughout economic cycles, Fallon relates. Given that small-cap ground leases are mostly in high-traffic locations – and tend to trade in all-cash transactions – cap rates are generally less volatile than with leveraged real estate investments as interest rates rise and fall, he elaborates.

“The marketplace views ground leases as a very secure type of investment – even more than ownership of both land and (net leased) structures,” continues Fallon, who has brokered deals for ground leases of properties occupied by the likes of 7-Eleven, KFC/Taco Bell, McDonald’s, Chick-fil-A, Wells Fargo, Bank of America and others.

“The thinking is that if the tenant is willing to spend the capital on the improvements (knowing they’ll eventually revert to the landowner), then it’s a location worth committing to.”

Long-term ground leases these days have exceptional appeal for high-net-worth individual investors tired of dealing with “tenants, toilets and trash” – and who also seek better fixed-income returns than today’s dismal bond rates, and far less wealth-preservation risk than the stock market entails.

But again, given how NNN leases are structured, ground lease investing can also offer savvy small-cap real estate entrepreneurs opportunities to generate even better returns through active trading strategies – or embracing re-tenanting risk under the right circumstances.

https://www1.smallbalance.com/marketbeat/marketbeat81.php

NNN Dollar General Sold

NNN Lease Market News

Dollar General Net Lease Sells for $1.23MM in Petersburg, VA

Calkain Companies recently sold a Dollar General (NYSE: DG) NNN net lease investment property located in Petersburg, VA. The transaction closed within the past 30 days and illustrated the compressing cap rates within the net lease segment of the market. The buyer was a privately held, fully integrated real estate investment company. The seller was a regional real estate developer. As a preferred developer for Dollar General, the same seller has engaged Calkain to sell another store in Halifax, VA. These Dollar General properties have been developed as part of Dollar General’s build-to-suit program. The stores have brand new 15-year NNN net leases, which provide passive income for the new owner.

Calkain’s Andrew Fallon, Assistant Vice President, facilitated the transaction by providing exclusive representation to the seller. More sales of Dollar General stores have been transacting since S&Praised the company’s credit rating to investment grade BBB- in April 2012. The Petersburg store was highly sought after given its proximity and access to the I-95 corridor, the surrounding demographics, and the favorable lease structure. Fallon commented, “As Dollar General continues to roll out new stores in new markets, the investor demand continues to increase for superior market locations.” The combination of tenant credit and triple net lease terms provide a passive, bond-like fixed income investment, “The leases with Dollar General’s guaranty provide a strong income stream for the buyer, who will have limited to no management responsibilities.” The buyer financed the purchase using a regional bank.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast, Northeast and a new office opening in the Midwest. Additional information about the firm and listings may be found at www.calkain.com.

Cap Rates on Walgreens and CVS Properties Remained Flat

NNN Lease Market News



Cap Rates on Walgreens and CVS Net Lease Properties 

Cap rates on Walgreens and CVS properties remained flat with the quarter prior at 6.45 percent and 6.7 percent respectively, but cap rates on restaurants fell 25 basis points to 7.25 percent. Cap rates on McDonald’s restaurants in particular fell 20 basis points to 4.8 percent, and cap rates on Dollar General stores fell 15 basis points, to 8.1 percent.

In addition, cap rates on properties leased to banks compressed 35 basis points, to 5.5 percent. Still, the cap rate compression on the most popular properties was below predictions. Back in May, researchers with Marcus & Millichap Real Estate Investment Services estimated that cap rates on dollar stores and drug stores would fall 30 basis points each from the first to the second quarter of 2012, while cap rates on quick service restaurants would fall 60 basis points.

However, few of those properties are trading in the core markets. Finding a McDonald’s or a Walgreens for sale in a primary market has “gotten tougher because there is not a lot of new things coming out of the ground and partly that’s what pushed down cap rates, as well as [the fact that] interest rates have gotten so low,” says Jonathan W. Hipp, president and CEO of Calkain Cos., a Reston, Va.-based brokerage and consulting firm specializing in the net lease sector.

To compensate for lack of product in prime locations, net lease investors have been more willing to accept risk in exchange for higher yields. Some are starting to buy assets leased to A-credit tenants in second-tier markets, Hipp notes. Others are investing in franchise restaurant locations instead of corporate-owned properties because they like the sector’s healthy growth.

www.calkain.com

Demand Heating up for Small and Mid-Size NNN Market

NNN Lease Market News

Low- and mid-range market sees growing activity as investors buy up store spaces; Eastern Consolidated starts new retail division

As the demand for these assets has increased in recent years, megadeals like Vornado’s $707 million retail condo purchase at 666 Fifth Avenue have grabbed headlines.

But the trend is now trickling down to the lower end of the market, brokers said, with demand heating up for small and mid-size retail condos in up-and-coming markets like southern Soho, especially along Canal Street, and the area adjacent to Times Square. An increase in 1031 exchanges — where owners buy property with money from the sale of property they already own, thus deferring the capital gains tax — has also contributed to the rising interest in retail condos, as investors have looked for cash flow in the difficult commercial real estate market, brokers said.

“It’s a very competitive market with lots of prospective buyers,” said Robin Abrams, executive vice president at Lansco, who noted that approximately half her brokers have done retail condo deals.

http://therealdeal.com/issues_articles/retail-condos-not-just-for-the-big-guys/

NNN Investment in Spring Hill, FL Sold

NNN  Lease Market News

Sale of Multi-Tenant NNN Investment in Spring Hill, FL

Calkain Companies, a national net lease commercial real estate firm, recently brokered the sale of a multi-tenant, NNN investment in Spring Hill, Florida. The two-tenant investment property is situated on 1.08+/- acres with high visibility to busy US HWY 19, just 30 minutes North of Tampa. It is occupied by Pet Supermarket, based out of Sunrise, Florida. BBB- rated, Humana Marketplace, headquartered in Kentucky is also a tenant.

The site is a 9000+/-sf building divided into 7000+/-sf for Pet Supermarket and 2000+/-sf for Humana. Pet Supermarket renewed their lease for 7 years with structured increases and options and Humana exercised their 2 year option. The seller, an experienced private owner and long-time client of Calkain, was looking to liquidate to secure other opportunities. The property sold for $1.61MM which is a 8% cap rate to a private Florida based buyer completing a 1031 exchange.

Calkain Associate, Teal Henderson, who was recently tapped to open the new Midwest office in St. Louis, MO from Tampa, exclusively represented the private seller and provided marketing and transaction support services throughout the sales process. The property was initially introduced to the market with quickly expiring leases. Henderson commented, "We quickly recognized the hurdle of the current lease terms being unfavorable along with the tertiary and lesser known Florida location of Spring Hill. We counseled the seller in reaching out to the tenants and restructuring with more attractive terms. Then after successful negotiations, we re-introduced the property on the market and generated a quick contract. A private buyer interested in a Florida property with an investment grade tenant with ties to the medical industry purchased the asset." As a NNN ground lease, this investment requires that the tenant pay for real estate taxes, insurance, and maintenance expenses, which effectively provides the landlord with a passive, bond-like income stream through commercial real estate ownership. The transaction occurred within the last 15 days and will be recorded in the public records.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast, Northeast and a new office opening in the Midwest. Additional information about the firm and listings may be found at www.calkain.com.

Net Leased Property Market Heats Up

NNN Lease Market News

The record-setting $14.5M purchase of a CVS net-lease property in Adams Morgan last week confirmed what everyone's thinking: prescription drug prices have gotten way out of hand. We'll be sure to ask President Obama about that in Charlotte. But something else the deal shows, Calkain's Rick Fernandez tells us, is investment demand for the sector in DC is approaching historical highs.

 As with other real estate assets, investors are drawn to DC's triple-net market for its resiliency. "This market has weathered recessions very well," Rick (above, with his sons Alex and Jack at Sunday's Nats-Cards game) tells us. "In terms of investor demand, it's right up there with New York City." Combine that with minimal construction starts and economic uncertainty and you've got a recipe for shrinking cap rates—the Adams Morgan CVS traded at a sub-6% cap.

 Here's the Adams Morgan CVS. In large part, pricing and demand are being driven by 1031 exchange buyers and high-net-worth investors concerned about their financial health, Rick says. Net-lease properties with a strong credit tenant provide cash flow and income with a real estate backstop that provides a measure of security that the stock market can't equal, and "now is an extremely favorable time for sellers of net lease properties." Institutional players are in the market, too, he tells us, but private buyers have provided the majority of aggressive offers in DC so far this year.

 Rick tells us urban locations are the most sought-after because of economic stability, population growth in the urban core it's easier to find replacement tenants in a tight spot. "At a pad site in front of a big box in the suburbs, you have fewer options to replace a tenant. If you're downtown, a 4,000 SF rectangle has a wide variety of tenants to attract."

www.calkain.com

NNN Lease Market: NNN CVS Pharmacy in Washington, DC Trades for $14....

NNN Lease Market: NNN CVS Pharmacy in Washington, DC Trades for $14....: NNN Lease Market News Calkain NNN Investment Advisors recently completed the sale of a NNN investment property in Washington, DC. The ...

NNN CVS Pharmacy Trades for $14.5 million

NNN Lease Market News

Calkain NNN Investment Advisors recently completed the sale of a NNN investment property in Washington, DC. The purchaser, a private 1031 investor, seeking a stable, credit rated, income-producing asset. The sale, closing at over $1,154 per square foot, broke the record previously set by Calkain for a NNN investment sale.

Rick Fernandez, Managing Director of Calkain Urban retail  Investment Advisors, represented the seller in the transaction and Calkain Managing Director, Jerry Burg, represented the buyer on the purchase of the CVS on Columbia Road in Adams Morgan. “The Adams Morgan CVS is well situated in a grocery anchored, dense, high traffic, urban location within a diverse residential and retail community,” explained Fernandez. “The investor understood that this CVS not only provided a stable income stream backed by a strong credit rated corporate tenant, but also a highly adaptable asset with rock solid generational value,” continued Burg.

The seller reviewed multiple offers from across the country before closing with a private investor who was working with Burg to identify $35MM in NNN investment properties for a 1031 exchange. The transactions closed in the past thirty days.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast and Northeast United States. Additional information about the firm and listings may be found at www.calkain.com.

NNN Lease Markets Slowly Improving

NNN Lease Market News

Office, Retail and Industrial Markets Slowly Improving

The commercial real estate market continues to slowly improve, lifting itself out of a slump that hit in 2010.

The overall market has stumbled along the way, but all in all, the industry is heading in the right direction, area brokers say. 

"We're starting to see projects on the radar for the first time in a long time," said Lee Warfield, president of Cushman & Wakefield | Thalhimer, a commercial real estate firm based in Henrico County.

Anchor tenants, for example, are being sought for Fairfield Commons Mall, which could be razed and rebuilt, off Nine Mile Road in eastern Henrico. "This is a healthy sign," Warfield said.

And the long bulldozed Azalea Mall in North Richmond is back on the books for a project, possibly a grocery store, he said. 

"The best indicator of a healthy or improving market is when existing companies take additional space or new companies move into the market," Thalhimer's Magrill said.

New companies from outside the market haven't moved here yet. But Allianz and SunTrust Banks Inc. taking more space speak to an improving market, he said.

The retail market continues to improve, despite large retailers such as Best Buy, Kmart, Gander Mountain, Dillard's and Food Lion closing some of their area locations this year.

Unlike the office sector, which suffered in 2009 and 2010, the retail sector never saw a big spike in vacancies, Magrill said.

Specialty grocer The Fresh Market and pet-supply retailer Petco are scheduled to open stores this year in Carytown Place, a development in the former Verizon building at Nansemond Street and Ellwood Avenue.

Food Lion closed two area stores this year, but the one in the Gleneagles Shopping Center off Ridgefield Parkway in western Henrico reopened as the second location of Libbie Market. At 32,000 square feet, the new Libbie Market Ridgefield is about three times as large as the original market on Libbie Avenue between Grove and Patterson avenues.

http://www2.timesdispatch.com

(NNN) Net Lease firm Brokered the Sale of Investment Retail Property in Columbia, MD

NNN Lease Market

Calkain Companies, a national net lease real estate brokerage firm, recently brokered the sale of a newly developed, multi-tenant investment retail property in Columbia, MD. The Shoppes at Dobbin Center, a 4,722 square foot three tenant building, was developed by a local group and leased to Starbucks, Radio Shack, and Spa #1 Nails. All of the tenants signed long-term triple net leases with structured rent increases and renewal options. The purchasers were a private group interested in diversifying investments into stable, income-producing real estate.

Calkain’s Andrew Fallon, Assistant Vice President, exclusively represented the seller, and provided marketing and transaction support services throughout the sales process. After working with the seller over the course of the development process, the property was introduced to the marketplace in 1Q 2012. Fallon explains the circumstances, “The property was under LOI and moving to contract the day it was introduced to the marketplace.” Fallon continued, “The seller was able to take advantage of the heated market and compressed cap rate environment given the combination of low interest rates, investor flight to quality, and the laws of supply and demand.” The buyer was a Washington, DC based investor seeking a passive, income-producing property as a family investment.

The characteristics of the property and net lease terms were extremely appealing to the purchasers and other prospective buyers. Calkain received multiple offers for the property, which is extremely well located in the Columbia, MD sub-market. The Shoppes at Dobbin Center was a redevelopment of a dense in-fill parcel in front of a Wal-Mart and adjacent to other national retailers including Chick-fil-a, McDonald’s, and Wendy’s. Further, the net lease structure associated with these corporate leases requires that the tenant pay for real estate taxes, insurance, and maintenance expenses – which effectively provides the landlord with a passive, bond-like income stream through commercial real estate ownership.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast and Northeast United States. Additional information about the firm and listings may be found at www.calkain.com.

The Property Market Begins to Show Signs of a Turnaround.

NNN Lease Market News

Japan commercial real estate market begins to show signs of a turnaround

Angelo Gordon & Co., a New York- based manager with $24 billion in assets, is seeking to boost Japan property investments amid signs of a recovery, after acquiring about $650 million of commercial real estate in the country the past two years.

Angelo Gordon is seeking bargains in Japan as the property market begins to show signs of a turnaround. Office buildings in Tokyo provided a 3.4 percent total return, including rental income and capital value, in 2011, after a 0.5 percent gain a year earlier, based on data compiled by RREEF, a property investment arm of Deutsche Bank AG. Before that, the market had three straight years of decline, the data showed.

Total return for properties in the U.K. rose to as high as 15 percent in 2010 and fell by half last year, while properties in the U.S. climbed for two straight years after posting two annual losses, based on data compiled by RREEF.

“Compared to major markets like New York and London, core asset prices in Tokyo have not appreciated very much,” Tanaka said. “We think there is upside potential as fundamentals improve.”

Angelo Gordon was founded in 1988 by Chief Executive Officer John Angelo and Chief Investment Officer Michael Gordon. Angelo Gordon began investing in commercial real estate in 1993 and has acquired more than $13 billion of properties, according to the company.

www.bloomberg.com

NNN Lease Market One of the Hottest Deals

NNN Lease Market News

The market for urban retail properties has witnessed a sharp resurgence in the past couple months. In-fact, we are seeing cap rates and prices that are reminiscent of the markets heyday back in 2005-2007. There is such a strong demand for these properties that they are routinely receiving multiple offers. This trend is being fueled by a number of factors such as inherently strong real estate quality, low interest rates, and a surplus of investors willing to deploy capital.

It is no secret that a great deal of the net lease market’s recent success is due to the security it offers investors. Net lease properties offer investors reliable income streams with little to no active management. These qualities are only enhanced in the context of urban condos. Unlike properties located in tertiary markets, urban retail can depend on higher foot traffic and a greater intrinsic value. This serves to add an extra layer of security to the investment – should a tenant leave it will not be hard to replace them.

Investors know this and are actively seeking these properties. Low interest rates coupled with a surplus of capital (that had previously been sitting on the sidelines) have led to a perfect storm of rising prices and falling cap rates. Likewise, many sellers are reluctant to sell because they would face the same problem in redeploying their capital. As demand continues to gain momentum it is likely investors will dig even deeper for tenant and location, resulting in downward pressure on cap rates.

http://www.globest.com/blogs

Real Estate Conference in the Dark

NNN Lease Market News

The lights went out during the National Association of Real Estate Investment Trusts annual REIT Week conference at the Hilton hotel in Midtown Manhattan. New York City police said that a transformer in the basement of the hotel experienced problems Wednesday afternoon, leading to partial power loss at the building. An electrician suffered a minor burn to his finger, police said.

Although there wasn’t an evacuation, many guests and workers crowded in the lobby and in front of the hotel where fire trucks and police vehicles were parked. But these  real-estate executives and experts didn’t let a building problem disrupt their discussions about, well, how to make buildings more profitable.

The afternoon presentations continued on the second floor with auxiliary lighting. The outage even provided fodder for some of the speakers. “This is a memorable moment,” joked Harvard economist Kenneth Rogoff who was giving the keynote speech at the conference’s luncheon in the Grand Ballroom when the outage occurred.

NNN Cap Rates Market Report

NNN Lease Market News

NNN cap rates declined by five basis points to just over 7.2% in the first quarter on average

The report covers trends in the macro economy with an eye on how these impact the net lease space.

It has found that the fit-and-start nature of the recovery has reinforced the appeal of net lease assets especially those with long term, high quality tenants. In addition, the sector is grappling by a lack of supply. The result of these multiple trends, not surprisingly, is that cap rates are low and getting lower. Namely, net lease cap rates declined by five basis points to just over 7.2% in the first quarter on average.

These rates, of course, fluctuate based on geography and tenant type. California and the Northeast, for example, claim the lowest cap rates.

The report also notes there is stronger investor demand for bank branches, pharmacies, and the best-performing fast food chains. Bank branches registered average cap rates of 6.1% in Q1, for example--100 basis points lower than the 7.1% average cap rate for pharmacies.

Investors, however, can be counted on to show a high degree of sophistication in their acquisitions not only across classes of tenants but specific tenants, as well. Sam Chandan, president and chief economist of Chandan Economics, tells GlobeSt.com. “Some pharmacy and bank branches are trading at sharply lower cap rates than their peers, even after controlling for variation in property quality and time to lease maturity.” For these most coveted assets, he says, debt yields are lower, as well, meaning that lenders perceive many of the same differences as relates to credit risk.

The most aggressive cap rates Jonathan Hipp, CEO ofCalkain, says he has seen has been in the mid 4s for “McDonald’s-type credit.”  Expect compression to continue, he tells GlobeSt.com. “Given where Treasuries are headed, people are looking for yield. Also, there is so much buyer interest in this product now we have gotten to the point where we almost don’t need new buyers. What we would like to have is more products.”

Not that the demand-supply imbalance will give investors pause, Hipp adds. “With everything going on, from the uncertain employment picture to the European debt crisis, at end of day people are still cautious on the economy. With the right combination of credit, location and length of lease it is a great time to be a seller in the net lease market.”

Or even a buyer, he says—but with a caveat. In this environment, current buyers should beware that an eventual exit strategy could happen in a period of higher interest rates and a diminishing flight to quality.

Source: GlobeSt.com

Gaylord to Convert to REIT

Gaylord Entertainment Co., GET -2.48% owner of four massive conference resorts, will sell its brand and management operations toMarriott International Inc. MAR -2.62% for $210 million and convert its property holdings to a real-estate investment trust.

The sale is a result of a strategic review Gaylord started early this year in reaction to prodding from its largest shareholder, Texas billionaire Robert Rowling. Mr. Rowling's TRT Holdings Inc., which owns the Omni Hotels & Resorts chain, was among four bidders for all or parts of Gaylord before Gaylord opted for the plan unveiled Thursday. A spokeswoman for TRT declined to comment.

Gaylord owns massive resort convention centers with 1,400 to 2,900 rooms each, including the Gaylord Opryland in Nashville, the Gaylord National in National Harbor, Md., the Gaylord Texan in Grapevine, Texas, and the Gaylord Palms in Orlando, Fla. As part of the deal, announced Thursday, Marriott is getting 35-year contracts to manage each of Gaylord's resorts at a 2% base management fee.

Gaylord had been planning to develop a 1,500-room resort in Aurora, Colo. But the company is revisiting these plans because of its conversion to a REIT.  Read more http://online.wsj.com

Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. An additional benefit to investing in REITs is the fact that many are accompanied by dividend reinvestment plans (DRIPs). Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate - shopping malls, for example - or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

Read more: http://www.investopedia.com/terms/r/reit.asp#ixzz1wYCRq270

Net Leased Investment Sector Continued to Gain Momentum

NNN Lease Market News

The U.S. retail investment sales market staged a strong performance last year as property sales rose 32 percent from 2010 to nearly $61 billion.

Prices for power centers and neighborhood centers increased 9.1 and 7.2 percent, to $148 and $135 per square foot, respectively.

While the highly coveted single-tenant net-lease investment sector continued to gain momentum, shopping centers and other multi-tenant properties captured nearly 68 percent of total sales, for which cap rates compressed by 40 basis points.

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 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. 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, 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.

When is the best time to invest in a single-tenant, 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.

Gateway investment markets New York, Northern New Jersey, Los Angeles, Chicago, Washington, D.C., South Florida and Boston dominated this investment activity.

Nontraded NNN Lease Investments REIT Will do a Better Job

NNN Lease Market News

Industry executives say these new nontraded REITswill do a better job of giving investors a way to invest in real estate without the volatility of exchange-traded REITs, which have assets of roughly $500 billion. Like existing nontraded REITs, the new ones are offering attractive initial dividends, such as American Realty Capital's nearly 7% distribution and Cole Real Estate's 5.5% distribution.

But these new structures haven't completely silenced critics, who point out that some fees remain high and investors might still face redemption problems.

Jim Sullivan, a managing director at REIT research firm Green Street Advisors, says investors are still better off investing in a publicly traded REIT. "They are more liquid, they are more transparent and the market tells you every day what they're worth," he says.

Traded REITs, like nontraded ones, are required to pay at least 90% of their taxable income in the form of dividends. But unlike nontraded REITs, traded REITs' values are set throughout the trading day, giving investors instant transparency.

Nontraded REITs first became popular a decade ago. The pitch: Long-term investors would hold them for seven to 10 years, during which time they would collect attractive dividends. Then the REITs would sell their properties or go public, returning to investors their principal plus any gains. The trade-off was that redemptions would be limited during the lives of the REITs.

But fees were high—as much as 11% in initial sales charges. And only 19 of about 90 have returned investors' principal over the years. http://online.wsj.com

“A dividend that high indicates the market doesn’t believe that dividend is sustainable.

Yields in the 20s and 30s (and higher) often reflect a view by the market that this

dividend is likely to be cut. When investors get jittery about a REIT’s ability to cover

its dividend, they tend to sell shares, which causes the yields to jump. Some REITs

have suspended their dividends, while others have either trimmed them or opted to

pay a portion of them in stock.”  BradThomas.

Dollar General Up By One Notch to BBB-minus

NNN Lease Market News

  

Standard & Poor's upgraded Dollar General rating by one notch to BBB-minus.

The action was hardly a shocker - Dollar General was on the agency's latest list of rising stars, fallen angels published on April 9, one of 23 global companies that were poised for a return to high grade. S&P had placed the company on CreditWatch with positive implications back in March.

But the upgrade is also the result of the company's robust sales, expectations for future growth as well as its commanding market position as a discount retailer.

 "Dollar General's revolutionary retail-innovations, ample square footage growth potential and strong management execution continue to deliver out-sized market share gains," Bank ofAmerica Merrill Lynch analysts said in a recent note.

The analysts do concede that Dollar General typically sells traditional convenience and some staple foods, and not usually fresh items.

The expansion in potentially underserved markets as well as its strategy of keeping its prices in line with cost increases will help position it in the longer run, Barclays said in a note.

And while longer term debt reduction might be deferred in lieu of share buybacks, Barclays says the company's solid free cash flow of around $536mln in 2011, and estimates of $643mln in 2012 and $949mln in 2014, will allow for a reduction of its approximately $2.5bln in debt and buttress earnings per share growth.

 http://www.reuters.com

NNN Lease Market Recovery Hindered by Tight Lending

NNN Lease Market News

NAR Reports U.S. Commercial Real Estate Recovery Hindered by Tight Lending

Based on the National Association of Realtors' (NAR) annual Commercial Real Estate 2012 Lending Survey, U.S. commercial real estate markets showed signs of recovery in 2011; commercial lending standards have tightened in the past year for small businesses and scuttled a major portion of contracted transactions for smaller properties.
Lawrence Yun, NAR chief economist, said there is a significant split in commercial lending depending on value.  "This is very much a tale of two markets.  There have been notable improvements in capital for large commercial transactions valued at $2.5 million or higher, but there remain significant challenges for small business," he said.
NAR's Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR. The NAR commercial components include commercial members; commercial committees, subcommittees and forums; commercial real estate boards and structures; and the NAR commercial affiliate organizations - CCIM Institute, Institute of Real Estate Management, Realtors Land Institute, Society of Industrial and Office Realtors®, and Counselors of Real Estate.


http://www.worldpropertychannel.com

Nontraded REITs are Being Valued

NNN Lease Market News

Chief Executive Terry Roussel said in a shareholder letter last month that the value of the stock had to be reduced based on falling values of the industrial parks the REIT purchased at the height of the market. 

Financial advisers have touted the prospect of profiting from real estate without the volatility of publicly traded REITs. They also have pointed to steady dividend payments of up to 7%, according to some financial advisers, investors and marketing material.

Until recently, most of these REITs performed as advertised. Dividend payments continued, and quarterly statements showed that the values of the REIT shares mostly stayed steady from the prices at which they were originally sold, even as the downturn clobbered the public REIT market.

But unlike publicly traded stocks, whose values are set in the marketplace, valuation methods for nontraded REITs have varied widely.

Given that many nontraded REITs were established six or seven years ago, they will need to get properties in line with current market values when they sell the assets or take the companies public.

The average returns for all equity REITs, as well as all individual REIT sectors, were collected

from the official website of the National Association of Real Estate Investment Trusts (NAREIT),

the worldwide representative voice for REITs and publicly traded real estate companies with an

interest in U.S. real estate and capital markets.

http://online.wsj.com

Houston's Texas Profitable Market

NNN Lease Market News

Last year, Houston recorded 18,366 housing starts, the most of any U.S. market followed by Metrostudy but still way below its peak of 48,000 starts in 2006. Demand for new homes in the Houston area is strengthening, and more than 20,000 new-home starts are expected this year, according to Metrostudy.

Weyerhaeuser's strategy makes particular sense in a state like Texas, where it is relatively easy to get entitlements to build on land. It makes less sense to hold such large tracts, said Paul C. Quinn, an analyst with RBC Capital Markets.

Tricon joined with Johnson Development Corp., a Houston land developer, and an unnamed Canadian institution to buy Cross Creek. Glenn Watchorn, Tricon's chief operating officer, said the master-planned community was attractive partly because of the amenities and infrastructure that Weyerhaeuser has already added.

"If you believe the housing market has bottomed out, there's probably no better place than land," said Mr. Watchorn.

http://online.wsj.com

NNN Lease Economic Report

NNN Lease Market News

How does employment growth impact net lease activity? Or is that question even relevant to the space at all? If you were to substitute “office” for “net lease” in that sentence, the answers would be clear and immediate: “significantly” and “definitely yes”, for starters. Then would follow any number of calculations designed to show the relationship between this particular macroeconomic metric employment and office leasing activity.

There is no comparable body of research for the net lease space, however. Now two companies locally based Calkain Cos., and New York based Chandan Economics are partnering to produce research in the net lease space. The companies, headed by Jonathan Hipp and Sam Chandan, respectively, plan to launch a quarterly publication starting in the next 30 to 60 days. Initially, the publication, called Net Lease Economic Report, will be available for free to its clients. The goal will be to analyze the impact and relationship between tenant, developer and investor demand for net lease assets as well as establish relationships with broader economic trends.

“This subset of commercial real estate has been growing for the past two years and attracting new investor interest,” Chandan tells GlobeSt.com. “There is a need for much more rigor behind the research and understanding of the investment.”

The last two years have indeed attracted new levels and types of investors, Hipp tells GlobeSt.com, primarily a combination of institutional and private market investor. “The net lease investment profile can be very appealing especially when there is a lack of predictability and enhanced risk around commercial real estate in general.” Net lease’s stability is one reason why it has been attracting growing levels of investment, Hipp adds.

“That flight to safety that happened after 2008 and 2009 and has continued to make the net lease an asset class highly sought after and highly attractive to investors.”

About Calkain: Calkain Companies where triple netlease properties are the focus of our business. Working through the net lease investment process with our clients is the basis and foundation of our firm. We are America’s Net Lease Company!

www.calkain.com

McDonald’s is taking Net Lease Market Up-to-date

NNN Lease Market news

McDonald’s Corp. (MCD), the world’s largest restaurant chain, reported a 4.8 percent gain in first- quarter profit as new menu items such as Chicken McBites attracted U.S. consumers.

Net income advanced to $1.27 billion, or $1.23 a share, from $1.21 billion, or $1.15, a year earlier, the Oak Brook, Illinois-based company said today in a statement. Analysts projected$1.23, the average of 26 estimates compiled by Bloomberg.

“McDonald’s is taking market share just because their restaurants are more up-to-date, more modern and cleaner” than competitors, Peter Saleh, an analyst at Telsey Advisory Group in New York, said in an interview. McCafe beverages, which are a “growing category,” are also helping boost sales, he said.

The shares climbed 1.8 percent to $97 at 9:37 a.m. in New York, after rising as much as 2 percent for the biggest intraday gain since Nov. 30. McDonald’s had declined 5 percent this year before today.

Wendy's Dethroning The King

NNN Lease Market News


Wendy’s has dethroned Burger King as the country’s second-biggest hamburger chain.


Wendy’s edged out Burger King in U.S. sales volume for the first time last year since Wendy’s was founded in 1969, according to a report by the food industry research firm Technomic Inc. that is set to be released next month.
Wendy’s had sales of $8.5 billion in 2011, compared with $8.4 billion for Burger King. McDonald's remained far larger than both with $34.2 billion in sales.
The figures are based on Technomic’s estimates of systemwide sales at franchise and company-owned restaurants, rather than corporate revenue, which includes fees from franchise operators. 
Worldwide, Burger King still has far more restaurants than Wendy’s and remains the second-biggest hamburger chain behind McDonald's.




http://www.washingtontimes.com

NNN Investment Sale of McDonald's Ground Lease in Maple Lawn, MD

NNN Lease Market


NNN Brokers 4.75% Cap Rate  McDonald’s on a long-term, NNN lease basis.



Calkain Companies, a national real estate investment brokerage firm, recently completed the sale of an investment property ground leased to McDonald’s on a long-term, NNN lease basis. The purchaser was a private investor seeking a passive, incoming-producing asset leased to a strong national credit tenant. The property is located within the Harris Teeter anchored retail square of the award winning Maple Lawn development, a beautiful mixed-use community in Fulton, Maryland.

Calkain’s Rick Fernandez brokered the transaction for the seller. “Favorable lease terms from an investment grade tenant at the vanguard of its retail sector and NNN lease investments anchored to a growing retail market provided an irresistible combination of factors that drew investors from all over the globe,” Fernandez said. “The seller was able to evaluate multiple offers and chose the strongest buyer able to close at this record setting cap rate,” Fernandez continued. The buyer closed the all-cash transaction earlier this year.


Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi- tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Tampa, FL, Ft. Lauderdale, FL, Wilmington, DE and Boston, MA. Additional information about the firm and its listings may be found at www.calkain.com.