Stamping
Ground, KY -- The commercial real
estate world continues it’s feeding frenzy of investment grade single tenant
credit deals chasing prices to new highs and cap rates to new lows (cap rates
have an inverse relationship to prices).
The recent sale of a brand new construction Dollar General in Stamping
Ground, KY serves as another example.
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| David Wells |
The asset traded at a
7.6% cap rate to an all cash foreign buyer for a price of $980,000. Both the buyer and seller were represented
by the Wells Net Lease Group, the largest brokerage firm of Dollar stores in
the Nation.
“We’ve done 50 dollar
store transactions this year, they’re a great credit asset with a strong
long-term outlook," says Wells Net Lease Group CEO David Wells.
"The buyer on this
deal was a foreign national, we’re dealing with more and more foreign
investors. People here like to sing the
blues about our economy, it’s a bunch of crap.
"America is resilient our legal
system in regards to property rights is the best in the world and capital keeps
pouring in. The buyer on this deal is
from Afghanistan.
"I travel a lot and
people always ask me about the strength of the US market, put it this way I’ve
never once had a US investor ask for a deal in Afghanistan."
The overall outlook for
US real estate assets with long-term credit tenants remains strong across all
commercial real estate market sectors.
“For credit rated tenants with ten or more years of term prices have
steadily risen throughout the year as more investors are seeking higher yields
than the bond market offers and the security of the underling real estate," says Mr. Wells.
"Cap rates will rise slightly going forward
in respect to the increase in interest rates but overall demand for credit
assets will continue.”
Wells adds, “People always get
excited when cap rates rise or fall, it’s just a function of the 10-year.
"The relationship between the cost of capital
and the cost of the asset remains historically at a 200-300 basis point spread,
the spread necessary to incentivize investors with positive leverage. Cap rates move with the 10-year treasury,
it’s the most efficient gauge of market valuation.”
“The industry tends to
think the demand for credit rated tenants is a trend, it’s no trend, and we’ve
all learned hard lessons over the past cycle.
"Standard & Poors & Moody’s ratings are the only plausible benchmark
to mitigate risk and lenders. Investors agree."
Dollar General has an
investment grade credit rating of BBB-.
For more information, please contact David Wells directly:
305.498.6095
