Finance
Net Leasing
Aug 04, 2009
By: Adam Perrotta, News Writer
While the net-lease investment market remains sluggish in the face of the lingering economic uncertainty, buyers and sellers still looking to make deals are finding it necessary to adapt their strategy. For some, that means simply making fewer moves. But others have been able to stay active by setting their sights on smaller deals.
In recent weeks, Tulsa, Okla.-based Stan Johnson has brokered several sales of smaller, single-tenant net-leased properties to a variety a buyers. In late July, the firm advised an institutional investor on the $4.5 million acquisition of a 14,800-square-foot retail property in Denton, Texas, that is fully-leased to Walgreens Pharmacy. That deal came soon after the brokerage negotiated the 1031 exchange sale of a Katy, Texas, property currently occupied by AutoZone to an individual investor.
And the deals have not been limited to Stan Johnson’s backyard of Texas. In mid-July, the firm represented the seller on the $2.55 million sale of a National Tire & Battery outlet in Lockport, Ill., to another individual investor. And in Reno, Nev., Stan Johnson aided in the sale of a 14,700-square-foot office building leased to Apollo College. The price on that deal was not revealed, but the seller’s asking price was just over $5 million.
And the spike in activity goes back to last quarter for Stan Johnson. The early June sale of a 6,000-square-foot medical office property in West Salem, Ore., marked the 13th net-lease deal that the firm had closed during 2009’s second quarter, up from just nine transactions during the first quarter. And the flow of deals doesn’t show any signs of slowing anytime soon. The July 21st AutoZone sale in Katy, Texas, was the firm’s fifth deal in just that region alone in the previous 30 days.
Given the current complications in the commercial property industry—mostly caused by the credit crunch and resultant economic downturn—this spate of smaller deals is somewhat unsurprising. These days, lower numbers make sense for both cash-strapped owners who’ve seen their refinancing options dry up, as well as buyers with far less access to capital leverage than in the free lending days of a couple of years ago.
These factors have combined to push sale prices down across the investment sector—and the net lease niche is no exception. According to commercial property data firm Real Capital Analytics, the average deal size for singlet-tenant net lease acquisitions has sloped downward--from $14.0 million in the 12 months ending this part May, to $13.3 million during the year ending in June, to $12.9 million during the 12 months ending in July.
And while there are signs that the economy may have reached a bottom, it is likely that capital will remain tough to come by even after a recovery has begun, as gun-shy lenders take pains to avoid over-extending themselves like they did during the last bubble. If this should prove to be the case, downward pricing pressure will remain, and average deal sizes will feel continue to feel the drag.
By: Adam Perrotta, News Writer
While the net-lease investment market remains sluggish in the face of the lingering economic uncertainty, buyers and sellers still looking to make deals are finding it necessary to adapt their strategy. For some, that means simply making fewer moves. But others have been able to stay active by setting their sights on smaller deals.
In recent weeks, Tulsa, Okla.-based Stan Johnson has brokered several sales of smaller, single-tenant net-leased properties to a variety a buyers. In late July, the firm advised an institutional investor on the $4.5 million acquisition of a 14,800-square-foot retail property in Denton, Texas, that is fully-leased to Walgreens Pharmacy. That deal came soon after the brokerage negotiated the 1031 exchange sale of a Katy, Texas, property currently occupied by AutoZone to an individual investor.
And the deals have not been limited to Stan Johnson’s backyard of Texas. In mid-July, the firm represented the seller on the $2.55 million sale of a National Tire & Battery outlet in Lockport, Ill., to another individual investor. And in Reno, Nev., Stan Johnson aided in the sale of a 14,700-square-foot office building leased to Apollo College. The price on that deal was not revealed, but the seller’s asking price was just over $5 million.
And the spike in activity goes back to last quarter for Stan Johnson. The early June sale of a 6,000-square-foot medical office property in West Salem, Ore., marked the 13th net-lease deal that the firm had closed during 2009’s second quarter, up from just nine transactions during the first quarter. And the flow of deals doesn’t show any signs of slowing anytime soon. The July 21st AutoZone sale in Katy, Texas, was the firm’s fifth deal in just that region alone in the previous 30 days.
Given the current complications in the commercial property industry—mostly caused by the credit crunch and resultant economic downturn—this spate of smaller deals is somewhat unsurprising. These days, lower numbers make sense for both cash-strapped owners who’ve seen their refinancing options dry up, as well as buyers with far less access to capital leverage than in the free lending days of a couple of years ago.
These factors have combined to push sale prices down across the investment sector—and the net lease niche is no exception. According to commercial property data firm Real Capital Analytics, the average deal size for singlet-tenant net lease acquisitions has sloped downward--from $14.0 million in the 12 months ending this part May, to $13.3 million during the year ending in June, to $12.9 million during the 12 months ending in July.
And while there are signs that the economy may have reached a bottom, it is likely that capital will remain tough to come by even after a recovery has begun, as gun-shy lenders take pains to avoid over-extending themselves like they did during the last bubble. If this should prove to be the case, downward pricing pressure will remain, and average deal sizes will feel continue to feel the drag.
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