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.

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. 

www.calkain.com

Selling off Federal Property a Simple Way to Raise Money

NNN Lease Market News 

Selling off Federal Property a Simple Way to Raise Money in this Market ..

According to officials familiar with the talks, the White House suggested the government could raise $12 billion by selling unneeded federal land, with as much as $5 billion coming from this one Los Angeles property. "Sell it," said Rep. Eric Cantor...

Selling off federal property might seem a simple way to raise money. But in reality, officials say, red tape and the costs of shuttering a building, as well as allaying local concerns, have stymied such efforts in the past.
"While local politicians and leaders love to [preside] over ribbon-cutting ceremonies, getting rid of property can be a much less rewarding experience," said Jeffrey Zients, chief performance officer at the White House Office of Management and Budget.
The Government Accountability Office reported this year that 24 federal agencies own more than 45,000 under-utilized buildings that cost $1.66 billion annually to operate.
The idea of selling properties remains under consideration as part of the deficit package now being negotiated, officials said.
Earlier this year, the White House proposed a new process for selling properties akin to how the government closes military bases. A board would make recommendations to Congress, and several properties would be packaged together and sent to Congress. Then Congress would vote either yes or no to the whole package, making it harder for lawmakers to protect home-state favorites. House Republicans have readied similar legislation.
Some properties marked for sale have little or no value—a supply shed or air-traffic control tower. Others are worth a lot, perhaps none more than the West Los Angeles Medical Center, situated on prime real estate.

http://online.wsj.com/article

Real Estate Market Takes a Tumble

NNN Lease Market News

Home Market Takes a Tumble

Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008

According to the Zillow index, a handful of California markets and Washington, D.C., saw price appreciation last year, but that has since reversed. Mr. Humphries attributes the "double dip" in those markets, which include Los Angeles, San Francisco and San Diego, to the way in which the tax credit stimulated demand from buyers. When the tax credit went away, markets were left with rising supply from foreclosures but with less demand from buyers.
Last year, the housing market showed signs of improving as price depreciation slowed in some markets and stabilized in others. In response, a number of economists began forecasting that housing would hit a bottom in late 2011, then begin to recover. But the improvements, spurred by federal programs that gave buyers up to $8,000 in tax credits, proved fleeting. Sales collapsed when the credits expired last summer, and prices in many markets have been falling ever since.


http://online.wsj.com/article