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| Michael Bull |
ATLANTA, GA (March 4, 2013) – With investors seeking
predictable income and higher returns than today’s low-paying bonds, the demand
for single-tenant, net-lease properties continues to grow.
That was one of the
observations shared by a panel of experts on the most recent episode of the
“Commercial Real Estate Show” radio program, hosted by Michael Bull of
Bull Realty. Bull and his guests discussed sales volumes, investor preferences
and cap rates.
The freestanding
properties typically feature credit-grade tenants, often on long-term leases,
who cover the buildings’ operating and maintenance costs.
 |
| Nancy Miller |
The number of sales
transactions in the Southeast involving single-tenant, net-lease sites increased
about 30 percent in 2012 when compared with 2011, said Nancy Miller, a
Bull Realty vice president who oversees the firm’s National Net Lease
Investment Group.
“From 2012 to 2013,
we anticipate that leveling out a little bit because supply is going to be
shorter,” Miller added. “But we are going to look at at least a 15 to 20
percent increase this year over last year’s transactions.”
Investors in
particular have a hearty appetite for properties occupied by dollar stores,
fast-food restaurants and auto-part stores, all of which continue to benefit
from a still-sluggish economy, the last because people are opting to keep their
older cars longer instead of buying new ones, the guests noted.
 |
| Karen Hutton |
Typical cap rates for single-tenant, net-lease sites occupied
by banks are around 6 percent, while the rates for fast-food and automotive
sites are around 7 percent and 7.3 percent, respectively, according to Miller.
The financial
stability of the national chains that frequently occupy single-tenant, net-lease
sites is one of the reasons for the sector’s appeal, as is the fact that the
leases often include corporate guarantees, Bull said.
For many investors,
in fact, such a guarantee is a requirement. “As a rule, I exclude everything
that’s not corporate guaranteed, out of the box,” said Roman DeVille,
CEO of Tempo Properties and of Capital South Financial Services.
Properties with
non-credit-grade tenants or shorter-term leases aren’t as highly sought after,
but nevertheless there is a segment of buyers who seek the higher returns that
accompany these slightly riskier investments, the panel noted.
Even a single-tenant,
net-lease property with a credit-grade tenant can have some unexpected landlord
costs, according to Karen Hutton, CEO of The Hutton Co. development
firm, who urged investors to carefully read the lease terms. “The devil’s in
the details,” Hutton said.
The entire episode
on the single-tenant net-lease market is available for download at www.CREshow.com. The next “Commercial Real Estate
Show” will be available March 7 and will examine investing in distressed and
value-add properties.
Contact:
Stephen Ursery
The Wilbert Group
E-mail: sursery@thewilbertgroup.com
Office: (404) 965-5026
Cell: (404) 405-2354
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