NNN Lease Market News
Can one entity serve as the landlord and the tenant, without actually owning the land or occupying the building? The answer is yes, and the legal structure is commonly known as a leasehold interest. Leasehold interest properties have been long viewed as the unknown and unfamiliar within the net lease arena. Ironically, this unknown and often misunderstood investment structure is neither new nor unique. Leaseholds originated from the feudal system of the United Kingdom where it is still widely used today, even in the residential market. Leaseholds has its origins from the medieval times 12th Century when it was found that renting out “the space” will and can generate a good and steady income for privileged Landowners, dating back over 900 years, Land or land ownership is more valuable than money.
Leasehold only exists in 3 countries Leasehold is all part of the feudal system of land tenure which has never really changed for the benefit of the people the masses.
While the pace of investments around the world has pushed capitalization rates to record low levels, leasehold interests consistently trade at higher cap rates. The yield is further enhanced by allowing for the depreciation of improvements to the leased property.
In an effort to secure a higher yield, investors have been diversifying geographically and as to the creditworthiness of the tenant. The overall determination of investors to find desirable yields has expanded the demand for properties into secondary and tertiary markets often with leases guaranteed by an unrated company. While initially these investments provided investors with greater returns, the yield has been narrowed to levels often found in primary markets regardless of the higher risk of the location and quality of the tenant. While non-investment grade tenants still offer some additional return based on the associated risk, tenants falling at or below the S&P rated BBB- investment grade threshold can still demand a premium based upon current press and positive outlooks from industry analysts. For these reasons, a leasehold interest may in fact be an alternative worth considering.Can one entity serve as the landlord and the tenant, without actually owning the land or occupying the building? The answer is yes, and the legal structure is commonly known as a leasehold interest. Leasehold interest properties have been long viewed as the unknown and unfamiliar within the net lease arena. Ironically, this unknown and often misunderstood investment structure is neither new nor unique. Leaseholds originated from the feudal system of the United Kingdom where it is still widely used today, even in the residential market. Leaseholds has its origins from the medieval times 12th Century when it was found that renting out “the space” will and can generate a good and steady income for privileged Landowners, dating back over 900 years, Land or land ownership is more valuable than money.
Leasehold only exists in 3 countries Leasehold is all part of the feudal system of land tenure which has never really changed for the benefit of the people the masses.
While the pace of investments around the world has pushed capitalization rates to record low levels, leasehold interests consistently trade at higher cap rates. The yield is further enhanced by allowing for the depreciation of improvements to the leased property.
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