Finance
Net Leasing
Jun 23, 2009
By: Dees Stribling, Contributing Editor
The net lease marketplace is hardly what it used to be, with deal volume at only a fraction of what it was during the mid-2000s boom years. But net lease never did quite grind to a halt, and there’s some evidence that the market is climbing out of the trough it found itself in during the last quarter of 2008.
According to Boulder Net Lease Funds L.L.C., industrial net lease transactions spiked some 464 percent in the first quarter of this year when compared with the last quarter of 2008, when the market was at a near standstill. In fact, the number of industrial net lease transactions closed nationwide during 1Q09 actually outpaced the 1Q08 total by 50 percent. Likewise, office and retail net lease volume also spiked upward during the first quarter of 2009, 228 percent and 284 percent respectively, noted Boulder.
At the same time, prices are down–especially in the retail side of the business. Boulder tracked a 13 percent decline, on a square foot basis, in the price of retail net lease properties during the first quarter of 2009. Retail net lease property cap rates were up over 52 basis points during the quarter. Industrial net lease properties, by contrast, declined in valuation during 1Q09, but cap rates more-or-less held steady at about 8 percent.
In fact, industrial properties might be the relative bright spot in the net lease business, as investors see them as the most stable of the property types, and corporate ownership sees them as a kind of piggy bank. In one recent large deal, American Realty Capital Trust Inc. acquired a newly constructed freight facility in metro Houston entirely net leased to FedEx Freight, a unit of Federal Express Corp. The property, which measures 152,640 square feet, is part of the Satsuma Station Industrial Park northwest of the city, and sold for about $30.9 million.
“We’ve been able to find robust opportunities in the net-lease sector, particularly among corporate clients and developers who are looking for large, multi-state dispositions to generate cost-efficient capital in lieu of replacing debt or issuing equity,” Nicholas S. Schorsch, chairman & CEO of American Realty Capital, told CPN.
In other words, the crippled credit markets might be hindering much of the real estate industry, but they are making corporate real estate owners think hard about monetizing their real estate holdings as a source of capital that doesn’t need to have a tough loan committee judging whether it’s go or no-go. “These companies are typically raising capital to stabilize balance sheets,” Schorsch said. “And they are looking to sale leasebacks as an efficient way to do that.”
By: Dees Stribling, Contributing Editor
The net lease marketplace is hardly what it used to be, with deal volume at only a fraction of what it was during the mid-2000s boom years. But net lease never did quite grind to a halt, and there’s some evidence that the market is climbing out of the trough it found itself in during the last quarter of 2008.
According to Boulder Net Lease Funds L.L.C., industrial net lease transactions spiked some 464 percent in the first quarter of this year when compared with the last quarter of 2008, when the market was at a near standstill. In fact, the number of industrial net lease transactions closed nationwide during 1Q09 actually outpaced the 1Q08 total by 50 percent. Likewise, office and retail net lease volume also spiked upward during the first quarter of 2009, 228 percent and 284 percent respectively, noted Boulder.
At the same time, prices are down–especially in the retail side of the business. Boulder tracked a 13 percent decline, on a square foot basis, in the price of retail net lease properties during the first quarter of 2009. Retail net lease property cap rates were up over 52 basis points during the quarter. Industrial net lease properties, by contrast, declined in valuation during 1Q09, but cap rates more-or-less held steady at about 8 percent.
In fact, industrial properties might be the relative bright spot in the net lease business, as investors see them as the most stable of the property types, and corporate ownership sees them as a kind of piggy bank. In one recent large deal, American Realty Capital Trust Inc. acquired a newly constructed freight facility in metro Houston entirely net leased to FedEx Freight, a unit of Federal Express Corp. The property, which measures 152,640 square feet, is part of the Satsuma Station Industrial Park northwest of the city, and sold for about $30.9 million.
“We’ve been able to find robust opportunities in the net-lease sector, particularly among corporate clients and developers who are looking for large, multi-state dispositions to generate cost-efficient capital in lieu of replacing debt or issuing equity,” Nicholas S. Schorsch, chairman & CEO of American Realty Capital, told CPN.
In other words, the crippled credit markets might be hindering much of the real estate industry, but they are making corporate real estate owners think hard about monetizing their real estate holdings as a source of capital that doesn’t need to have a tough loan committee judging whether it’s go or no-go. “These companies are typically raising capital to stabilize balance sheets,” Schorsch said. “And they are looking to sale leasebacks as an efficient way to do that.”
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