New York City-based American Realty Capital Trust Inc. purchased a 3,617-square-foot BB&T Net Lease Investment bank building for $3.85 million. The price equated to $1,065 per square foot.
Guenter Manczur of Calkain Cos. represented the buyer and William Holly of Holly Sime Realty represented the seller. “This acquisition demonstrates the value of well located investment real estate when leased to a high-credit tenant,” Manczur says in a press release. http://www.calkain.com/
Friday, February 18, 2011
Triple-net-lease Properties' Returns are More Secure
Triple-net-lease properties' returns are more favorable and more secure than some traditional investment vehicles
Despite the economic downturn and the fact that many aspects of the commercial real estate industry still need time to season before true recovery takes place, some niche segments of the market are actually performing extremely well. In fact, some are at the same level they reached at the height of the market.
Triple-net-lease investment properties, in particular, may be a true bright spot on the commercial investment horizon. Here's why.
Triple net lease properties are probably some of the most commonly noticed commercial real estate in the market. Most of the assets are drugstores, bank branches, restaurants, home-improvement centers and the like. These are core assets that have daily users and requirements. Typically, they are single-tenant buildings where, through the lease structure, the tenant is responsible for the taxes, insurance, and maintenance and management of the building - the three "nets."
Investors have a strong appetite for passive income in today's market, as there are few alternatives for them to receive a return that is equal to or better than what net lease assets provide. Additionally, it seems that lenders are becoming more comfortable with the asset type - many transactions in today's market are using some sort of lender-provided leverage.
Mortgage brokers are an integral part of the lending process for net lease investments, especially because one lender won't provide the best rate and terms for a particular investor every time. Brokers who want to increase their business in this asset class should understand what goes into funding triple net lease properties and be aware of the market's emerging trends.
Underwriting the tenant
Like in any underwriting process, lenders consider the real estate's value first. With net lease investments, however, the current tenant's credit also is weighed heavily.
Because tenants occupying single-tenant buildings typically sign long leases - sometimes for as many as 25 years or more - lenders want to know who is actually paying the rent to support the property for that long. Therefore, the underwriting of the tenant's credit becomes a key factor for lenders considering net leased assets.
There is some standardization for rating tenants, which comes primarily from credit-rating agencies such as Standard & Poor's (S&P), Moody's Investor Service, Fitch Ratings, etc. These agencies each have their own alphanumeric system to report how a particular company is performing from a credit perspective. S&P, for instance, has ratings that begin at AAA as the best-possible credit and incrementally go down to D.
In today's lending environment, net lease tenants with an S&P credit rating of BBB or greater have a better chance of getting a lender's attention because they are seen to be less risky. Tenants with credit ratings less than BBB are perceived to be more likely to default over the term of the lease.
In fact, a Moody's study quantified this phenomenon, stating that companies with a BBB- credit rating have a 4-percent chance of defaulting on their lease within any five-year period. Conversely, a company that has rating of B- has a 43-percent chance of defaulting on its lease within the same period. As a matter of comparison, companies with AAA ratings have a 0.15-percent chance of defaulting. It is pretty clear why lenders focus their underwriting on the potential tenant's credit.
Funding net leases
Although mortgage brokers unfamiliar with this asset class may think this type of debt comes from sophisticated sources housed in a class-A skyscraper on Wall Street, the vast majority of loans for net lease investments come from banks.
Real Capital Analytics, a market-research company, recently reported that 51 percent of single-tenant acquisition transactions completed to-date in 2010 came from a traditional bank. It also reported, however, that 40 percent came from a national bank and 11 percent was from a regional or local bank.
It seems that when a recession hits, the lending environment changes to a point that sophisticated financing instruments are no longer needed to drive the market. Instead, individual relationships between borrowers, lenders and their conduits (i.e., mortgage brokers) are the primary source of transaction volume.
In addition, Real Capital Analytics reported that 30 percent of the transactions completed this past year used existing financing that was assumed by a new buyer. Anecdotally, investors active in the market at the beginning of this year did not have as many sources of capital. Those who made purchases that required financing were given financing quotes that were outrageous and did not allow the transaction to make sense to the investor. Therefore, they assumed the debt from the previous owner because the terms and interest rates were more favorable than the market at that time. Sourcing debt for net lease investments is becoming easier, however.
Gaining market share
Single-tenant properties have become so popular this past year that they comprised roughly 35 percent of all commercial real estate transactions completed in the first two quarters of the year, according to data from Real Capital Analytics. By comparison, when the market was at its peak in 2007, only 20 percent of all transactions included the asset class.
With more than $425 billion in total commercial sales in 2007 - which included $85 billion in single-tenant sales - compared to $35 billion in total sales for these past first two quarters - which included $12.25 billion in single-tenant sales - it is apparent that with fewer transactions, more people are steering toward stabilized and lower-risk properties.
Capitalization rates - or cap rates - are a quick snapshot of an investor's return. In today's market, cap rates are roughly 6 percent to 8 percent for creditworthy properties. When a basic comparison is made using other passive investments, it is fairly clear why investors are seeking to put their capital to work in the property type.
Most investors who have cash available to make passive, nonspeculative investments are using basic money-market or savings accounts to hold the cash. When returns for those investment vehicles hover around 1 percent, the investor is motivated to find alternative investments for that capital while also maintaining a steady and safe cash flow over a period of time. Net lease properties are filling that void.
Tracking trends
There are different periods where lenders will have a strong appetite for a particular tenant and less so for other tenants, and this changes over time. Brokers who stay on top of these kinds of trends in their markets and leverage their relationships with lenders can help clients find the best rates and terms at any particular moment.
As an example, Walgreen Co. drugstores - a common triple net lease tenant - have an S&P credit rating of A+. As such, lenders are comfortable with these stores' credit and viability as a longstanding tenant. At the beginning of this year, however, there were more than 450 Walgreens stores available for purchase as net lease investments.
Because most investors need financing to purchase a single store and the average sale price for a Walgreens store is about $5 million, mortgage brokers were engaged to find the best debt. Lenders, however, found that they had too many Walgreens loans on their balance sheets and started to slow down the distribution of debt for that tenant. Brokers show their value in these scenarios by finding other lending sources that aren't as saturated with one particular tenant.
Supply and demand dictates the rate and terms of a particular tenanted-occupied building. Because of their popularity, Walgreens investments typically garner a higher interest rate. Other companies that have S&P credit ratings of A+ and similar lease terms, but higher price tags and therefore fewer buyers may have substantially lower interest rates.
Lenders, therefore, dictate rates and terms based not only on the tenant's credit, but also on subjective factors that move markets in different directions at different times. Mortgage brokers should be cognizant of these trends and have their arsenal of lending sources available for their clients as market indicators change.
Net lease properties have proven to be a strong asset class in this recovery -driven market. Lenders are seeking assets for their portfolios to maintain strong balance sheets. It's always better to have a stabilized net lease investment earning income for the lender and the investor on the books as opposed to vacant, speculative land that likely has an undetermined value for future development.
Mortgage brokers who focus on this asset class can take advantage of the new demand for these properties, as they are some of the only properties getting funded with rates and terms last seen at the height of the market. http://www.calkain.com/
Despite the economic downturn and the fact that many aspects of the commercial real estate industry still need time to season before true recovery takes place, some niche segments of the market are actually performing extremely well. In fact, some are at the same level they reached at the height of the market.
Triple-net-lease investment properties, in particular, may be a true bright spot on the commercial investment horizon. Here's why.
Triple net lease properties are probably some of the most commonly noticed commercial real estate in the market. Most of the assets are drugstores, bank branches, restaurants, home-improvement centers and the like. These are core assets that have daily users and requirements. Typically, they are single-tenant buildings where, through the lease structure, the tenant is responsible for the taxes, insurance, and maintenance and management of the building - the three "nets."
Investors have a strong appetite for passive income in today's market, as there are few alternatives for them to receive a return that is equal to or better than what net lease assets provide. Additionally, it seems that lenders are becoming more comfortable with the asset type - many transactions in today's market are using some sort of lender-provided leverage.
Mortgage brokers are an integral part of the lending process for net lease investments, especially because one lender won't provide the best rate and terms for a particular investor every time. Brokers who want to increase their business in this asset class should understand what goes into funding triple net lease properties and be aware of the market's emerging trends.
Underwriting the tenant
Like in any underwriting process, lenders consider the real estate's value first. With net lease investments, however, the current tenant's credit also is weighed heavily.
Because tenants occupying single-tenant buildings typically sign long leases - sometimes for as many as 25 years or more - lenders want to know who is actually paying the rent to support the property for that long. Therefore, the underwriting of the tenant's credit becomes a key factor for lenders considering net leased assets.
There is some standardization for rating tenants, which comes primarily from credit-rating agencies such as Standard & Poor's (S&P), Moody's Investor Service, Fitch Ratings, etc. These agencies each have their own alphanumeric system to report how a particular company is performing from a credit perspective. S&P, for instance, has ratings that begin at AAA as the best-possible credit and incrementally go down to D.
In today's lending environment, net lease tenants with an S&P credit rating of BBB or greater have a better chance of getting a lender's attention because they are seen to be less risky. Tenants with credit ratings less than BBB are perceived to be more likely to default over the term of the lease.
In fact, a Moody's study quantified this phenomenon, stating that companies with a BBB- credit rating have a 4-percent chance of defaulting on their lease within any five-year period. Conversely, a company that has rating of B- has a 43-percent chance of defaulting on its lease within the same period. As a matter of comparison, companies with AAA ratings have a 0.15-percent chance of defaulting. It is pretty clear why lenders focus their underwriting on the potential tenant's credit.
Funding net leases
Although mortgage brokers unfamiliar with this asset class may think this type of debt comes from sophisticated sources housed in a class-A skyscraper on Wall Street, the vast majority of loans for net lease investments come from banks.
Real Capital Analytics, a market-research company, recently reported that 51 percent of single-tenant acquisition transactions completed to-date in 2010 came from a traditional bank. It also reported, however, that 40 percent came from a national bank and 11 percent was from a regional or local bank.
It seems that when a recession hits, the lending environment changes to a point that sophisticated financing instruments are no longer needed to drive the market. Instead, individual relationships between borrowers, lenders and their conduits (i.e., mortgage brokers) are the primary source of transaction volume.
In addition, Real Capital Analytics reported that 30 percent of the transactions completed this past year used existing financing that was assumed by a new buyer. Anecdotally, investors active in the market at the beginning of this year did not have as many sources of capital. Those who made purchases that required financing were given financing quotes that were outrageous and did not allow the transaction to make sense to the investor. Therefore, they assumed the debt from the previous owner because the terms and interest rates were more favorable than the market at that time. Sourcing debt for net lease investments is becoming easier, however.
Gaining market share
Single-tenant properties have become so popular this past year that they comprised roughly 35 percent of all commercial real estate transactions completed in the first two quarters of the year, according to data from Real Capital Analytics. By comparison, when the market was at its peak in 2007, only 20 percent of all transactions included the asset class.
With more than $425 billion in total commercial sales in 2007 - which included $85 billion in single-tenant sales - compared to $35 billion in total sales for these past first two quarters - which included $12.25 billion in single-tenant sales - it is apparent that with fewer transactions, more people are steering toward stabilized and lower-risk properties.
Capitalization rates - or cap rates - are a quick snapshot of an investor's return. In today's market, cap rates are roughly 6 percent to 8 percent for creditworthy properties. When a basic comparison is made using other passive investments, it is fairly clear why investors are seeking to put their capital to work in the property type.
Most investors who have cash available to make passive, nonspeculative investments are using basic money-market or savings accounts to hold the cash. When returns for those investment vehicles hover around 1 percent, the investor is motivated to find alternative investments for that capital while also maintaining a steady and safe cash flow over a period of time. Net lease properties are filling that void.
Tracking trends
There are different periods where lenders will have a strong appetite for a particular tenant and less so for other tenants, and this changes over time. Brokers who stay on top of these kinds of trends in their markets and leverage their relationships with lenders can help clients find the best rates and terms at any particular moment.
As an example, Walgreen Co. drugstores - a common triple net lease tenant - have an S&P credit rating of A+. As such, lenders are comfortable with these stores' credit and viability as a longstanding tenant. At the beginning of this year, however, there were more than 450 Walgreens stores available for purchase as net lease investments.
Because most investors need financing to purchase a single store and the average sale price for a Walgreens store is about $5 million, mortgage brokers were engaged to find the best debt. Lenders, however, found that they had too many Walgreens loans on their balance sheets and started to slow down the distribution of debt for that tenant. Brokers show their value in these scenarios by finding other lending sources that aren't as saturated with one particular tenant.
Supply and demand dictates the rate and terms of a particular tenanted-occupied building. Because of their popularity, Walgreens investments typically garner a higher interest rate. Other companies that have S&P credit ratings of A+ and similar lease terms, but higher price tags and therefore fewer buyers may have substantially lower interest rates.
Lenders, therefore, dictate rates and terms based not only on the tenant's credit, but also on subjective factors that move markets in different directions at different times. Mortgage brokers should be cognizant of these trends and have their arsenal of lending sources available for their clients as market indicators change.
Net lease properties have proven to be a strong asset class in this recovery -driven market. Lenders are seeking assets for their portfolios to maintain strong balance sheets. It's always better to have a stabilized net lease investment earning income for the lender and the investor on the books as opposed to vacant, speculative land that likely has an undetermined value for future development.
Mortgage brokers who focus on this asset class can take advantage of the new demand for these properties, as they are some of the only properties getting funded with rates and terms last seen at the height of the market. http://www.calkain.com/
Thursday, February 17, 2011
Two Separate Net lease Investment Properties Sold
Tampa, FL – Calkain Companies, a national real estate investment brokerage firm, recently procured two separate investment sales. The first property, a two-tenant facility in Lakeland, Florida closed on January 4th for a price of $2,175,000. The second closing took place just days later on January 6th when a retail bank branch was purchased for $3,437,000 in the Tampa, Florida suburb of Seffner. Patrick Nutt, Associate Vice President with Calkain Realty Advisors exclusively represented both sellers in the unrelated transactions.
The Lakeland site at 3434 South Florida Avenue is a newly constructed 5,056 square foot building occupied by Chipotle Mexican Grill and Aspen Dental. Strategically located in close proximity to a renovated Wal-Mart Supercenter, the site offers the presence of a full traffic signal, providing superior visibility and access into the property. The purchaser, a foreign investor based in France, paid just over $430 per square foot in this all-cash transaction. When asked about the deal, Nutt commented, "Quality real estate, stable tenancy, and new construction are all hard to come by these days, and this property had all three attributes." The property was only on the market for a few weeks, during which time Patrick was able to generate five written offers for the seller, a Florida based merchant developer.
The second closing was the sale of a free standing retail property occupied by BB&T Bank. The bank branch, located at 1707 South Parsons Avenue, was part of Branch Banking and Trust's recent acquisition of Colonial Bank. The new owner, a private investor, purchased the property at a price reflective of a 6.9% capitalization rate. The 0.86 acre parcel of land is an outparcel to a Sweetbay anchored shopping center. Other retailers in the center included Bank of America, Taco Bell, and a newly constructed CVS pharmacy. Patrick represented both the buyer and seller in this transaction, adding, "The buyer was very attracted to the high credit of the tenant as well as the absolutely passive nature of the lease while the seller was able to achieve a price equal to the peak of the market in 2007, offering a transaction where both parties were easily able to achieve their investment goals."
Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Florida, Maryland and Delaware. Additional information about the firm and its listings may be found at http://www.calkain.com/
The Lakeland site at 3434 South Florida Avenue is a newly constructed 5,056 square foot building occupied by Chipotle Mexican Grill and Aspen Dental. Strategically located in close proximity to a renovated Wal-Mart Supercenter, the site offers the presence of a full traffic signal, providing superior visibility and access into the property. The purchaser, a foreign investor based in France, paid just over $430 per square foot in this all-cash transaction. When asked about the deal, Nutt commented, "Quality real estate, stable tenancy, and new construction are all hard to come by these days, and this property had all three attributes." The property was only on the market for a few weeks, during which time Patrick was able to generate five written offers for the seller, a Florida based merchant developer.
The second closing was the sale of a free standing retail property occupied by BB&T Bank. The bank branch, located at 1707 South Parsons Avenue, was part of Branch Banking and Trust's recent acquisition of Colonial Bank. The new owner, a private investor, purchased the property at a price reflective of a 6.9% capitalization rate. The 0.86 acre parcel of land is an outparcel to a Sweetbay anchored shopping center. Other retailers in the center included Bank of America, Taco Bell, and a newly constructed CVS pharmacy. Patrick represented both the buyer and seller in this transaction, adding, "The buyer was very attracted to the high credit of the tenant as well as the absolutely passive nature of the lease while the seller was able to achieve a price equal to the peak of the market in 2007, offering a transaction where both parties were easily able to achieve their investment goals."
Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Florida, Maryland and Delaware. Additional information about the firm and its listings may be found at http://www.calkain.com/
NNN NET LEASED MEDICAL OFFICE BUILDINGS
Tampa, FL – Calkain Companies, a national real estate investment brokerage firm, has procured the sale of two separate net leased medical office buildings. One asset was located in Austin, Texas while the second property was situated in Anderson, South Carolina. Both facilities were operated under the brand name Affordable Dentures by Affordable Care Industries, a private company with over 150 locations nationwide. Patrick Nutt, Senior Associate of Calkain Realty Advisors, the private market division of Calkain Companies, represented the seller in both transactions.
The Texas property, located at 8136 Tuscany Way, was built for the tenant in 2008. The purchaser, a locally based Limited Partnership, made the $1,400,000 acquisition through a limited partnership as part of a IRC section 1031 exchange. The Seller, One Acre LLC, was the original owner of the property that constructed the 2,972 square foot build to suit facility for Affordable Care Industries. The purchaser was attracted to the local nature of the facility as well as the long term lease in place.
The South Carolina transaction, sold by a private investor, was purchased by Rutledge Realty Inc, a family owned investment company based in Anderson. The dental facility was located at 3004 North Main Street and was situated on just over 0.5 acres of land. As with the Austin property, this site had a long term lease in place with scheduled rent increases throughout the initial 12 year term.
Nutt commented, "Although Affordable Care is a private company, once we were able to open a dialogue with the tenant, both purchasers were very more than comfortable with the financial strength of the company". Investors generally put an emphasis on the lease terms, credit of the tenant, and underlying real estate, Nutt continued, "beyond the typical underwriting, both purchasers were attracted to the stable nature of the tenant’s medically related business, as well as the specialty build out required for this tenant which shows further commitment to the site from Affordable Care".
Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Florida, Maryland and Delaware. Additional information about the firm and its listings may be found at http://www.calkain.com/
The Texas property, located at 8136 Tuscany Way, was built for the tenant in 2008. The purchaser, a locally based Limited Partnership, made the $1,400,000 acquisition through a limited partnership as part of a IRC section 1031 exchange. The Seller, One Acre LLC, was the original owner of the property that constructed the 2,972 square foot build to suit facility for Affordable Care Industries. The purchaser was attracted to the local nature of the facility as well as the long term lease in place.
The South Carolina transaction, sold by a private investor, was purchased by Rutledge Realty Inc, a family owned investment company based in Anderson. The dental facility was located at 3004 North Main Street and was situated on just over 0.5 acres of land. As with the Austin property, this site had a long term lease in place with scheduled rent increases throughout the initial 12 year term.
Nutt commented, "Although Affordable Care is a private company, once we were able to open a dialogue with the tenant, both purchasers were very more than comfortable with the financial strength of the company". Investors generally put an emphasis on the lease terms, credit of the tenant, and underlying real estate, Nutt continued, "beyond the typical underwriting, both purchasers were attracted to the stable nature of the tenant’s medically related business, as well as the specialty build out required for this tenant which shows further commitment to the site from Affordable Care".
Calkain is a full service real estate brokerage firm with a national scope focusing on single and multi tenant retail, industrial, hotel and office net-leased transactions. Calkain has offices in Reston, VA (Washington, DC), Florida, Maryland and Delaware. Additional information about the firm and its listings may be found at http://www.calkain.com/
Albert Heijn, father of the Dutch supermarket, dies at 83
Albert Heijn, grandson of the founder of the Dutch supermarket group that bears his name, has died at home in England at the age of 83.
Heijn started working for the company in 1949 when it was still run by his grandfather in Zaandam and two years later set up the country's first self-service store.
He was chairman of the board from 1963 to 1989 and is largely credited with turning the supermarket group into a nationwide and international success.
Albert Heijn is the oldest part of Ahold, and still has the largest market share in the Netherlands The stores are full service supermarkets (as opposed to discounters) known for their focus on quality stores and products. This focus on quality is part of the reason that Albert Heijn is regarded as one of the more expensive supermarkets. However, after the recent price war - initiated by Albert Heijn itself and involving nearly all Dutch supermarket chains - the prices are now at a normal level
Dutch Food Wholesaler Finds a Sale-Leaseback Deal
To use a tired old industry cliché, it was a win-win deal for buyer and seller.
The buyer: W.P. Carey & Co., a longtime New York City-based investor-developer-landlord of commercial properties in the U.S. and abroad.
The seller: C1000 BV, the second-largest food retailer by sales in the Netherlands.
The sale deal: W.P. Carey pays C1000 BV $209.3 million in U.S. cash (155 million Euros) for all six of the Dutch firm's logistics facilities.
The lease-back deal: C1000 BV leases back the six properties for 15 years. The triple-net lease means that although W.P. Carey is the owner, C1000 is responsible for paying for upkeep, any modernization of the facilities and property taxes.
The benefits to W.P. Carey: The sale-leaseback specialist grows its European portfolio to 266 properties in 16 countries, comprising 32 million square feet of space and valued at about $3.2 billion, according to the company's website.
A leaseback is very simple really. Sometimes known as a sale-leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. The purpose of the leaseback is to free up the original owner's capital while allowing the owner to retain possession and use of the property. The type of property involved can be anything from residential or commercial real estate to equipment or vehicles.
http://www.realestatechannel.com/
The buyer: W.P. Carey & Co., a longtime New York City-based investor-developer-landlord of commercial properties in the U.S. and abroad.
The seller: C1000 BV, the second-largest food retailer by sales in the Netherlands.
The sale deal: W.P. Carey pays C1000 BV $209.3 million in U.S. cash (155 million Euros) for all six of the Dutch firm's logistics facilities.
The lease-back deal: C1000 BV leases back the six properties for 15 years. The triple-net lease means that although W.P. Carey is the owner, C1000 is responsible for paying for upkeep, any modernization of the facilities and property taxes.
The benefits to W.P. Carey: The sale-leaseback specialist grows its European portfolio to 266 properties in 16 countries, comprising 32 million square feet of space and valued at about $3.2 billion, according to the company's website.
A leaseback is very simple really. Sometimes known as a sale-leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. The purpose of the leaseback is to free up the original owner's capital while allowing the owner to retain possession and use of the property. The type of property involved can be anything from residential or commercial real estate to equipment or vehicles.
http://www.realestatechannel.com/
Wednesday, February 16, 2011
Net Lease Investment Deals are Picking up in Sarasota County
Net Lease Investment Deals are Picking up in Sarasota County
For the past few months, it has been hard to come up with enough $1 million plus net lease investment deals in Sarasota County to fill a top 10 list. But that wasn’t a problem in January.
Kohl’s Department Stores led all net lease commercial deals in the county with its $3.8 million purchase of a 59,582-square-foot retail building at the intersection on Tamiami Trail and Central Sarasota Parkway.
Next on the list was Plantation Grove Ltd., a Sarasota company managed by Neil Malamud, which bought medical a 13,738-square-foot medical office building at 1427 S. Tamiami Trail in Sarasota for $3.75 million.
The third entry on the list, however, does not count as a sale. It was a transfer of 22,572-square-feet of office space to a bank-owned limited liability company.
Here is a complete list of the top 10 net lease investment deals in Sarasota in January:
By Michael Braga (email)
For the past few months, it has been hard to come up with enough $1 million plus net lease investment deals in Sarasota County to fill a top 10 list. But that wasn’t a problem in January.
Kohl’s Department Stores led all net lease commercial deals in the county with its $3.8 million purchase of a 59,582-square-foot retail building at the intersection on Tamiami Trail and Central Sarasota Parkway.
Next on the list was Plantation Grove Ltd., a Sarasota company managed by Neil Malamud, which bought medical a 13,738-square-foot medical office building at 1427 S. Tamiami Trail in Sarasota for $3.75 million.
The third entry on the list, however, does not count as a sale. It was a transfer of 22,572-square-feet of office space to a bank-owned limited liability company.
Here is a complete list of the top 10 net lease investment deals in Sarasota in January:
By Michael Braga (email)
Health Care REIT $3.2 billion Of Gross Investment In 2010
Health Care REIT, Inc. today announced operating results for the company's fourth quarter and year ended December 31, 2010.
"Health Care REIT creates shareholder value through its relationship investment strategy," commented George L. Chapman, chief executive officer at Health Care REIT, Inc. "We completed $3.2 billion of gross investment in 2010 and announced $1.3 billion to-date in 2011. Of these investment , 90% were originated off-market through long-term industry relationships. Last year alone, we formed new relationships with nine outstanding operators and 14 high-quality health systems. We believe we have built a best-in-industry management team to successfully and profitably integrate these acquisitions.
"Health Care REIT creates shareholder value through its relationship investment strategy," commented George L. Chapman, chief executive officer at Health Care REIT, Inc. "We completed $3.2 billion of gross investment in 2010 and announced $1.3 billion to-date in 2011. Of these investment , 90% were originated off-market through long-term industry relationships. Last year alone, we formed new relationships with nine outstanding operators and 14 high-quality health systems. We believe we have built a best-in-industry management team to successfully and profitably integrate these acquisitions.
Tuesday, February 15, 2011
Commercial Real Estate Lease Terms
Definition: A Triple Net Lease is also known as Net Net Net Lease or NNN Lease. This is a type of net lease in which the tenant pays all or part of the taxes, insurance, and maintenance associated with use of the property. These fees are paid in addition to the tenant's regular monthly rent.
Definition: Double Net Lease is a type of net lease in which the lessee (tenant) pays all or part of taxes and insurance associated with use of the property. These fees are paid in addition to monthly rent for use of the actual space.
Definition: A Net Lease is a type of commercial real estate lease in which the lessee (tenant) pays for their space, as well as for part or all of certain “Usual Costs” (expenses associated with operating, maintenance and use of the property) that the landlord pays.
Expenses incorporated into net leases may include taxes, utilities, janitorial services, property insurance, property management fees, sewer, water, and trash collection. Net leases almost always favor the lessor (landlord) and should be negotiated to include caps, or, the maximum amount a landlord can increase fees each year.
Definition: Fully Serviced Lease refers to a lease in which the monthly rent includes the cost of certain types of services, which may include janitorial services, trash collection, utilities, water and sewer charges, property taxes, etc.
Instead of the tenant opening their own service or utility accounts and directly paying for these costs, the landlord pays for the expenses, but includes an amount in the monthly rent to help off-set these costs.
Definition: The Modified Net Lease As a compromise between the gross lease and the triple net, the modified net lease is quite helpful in helping landlords and tenants to structure lease terms that work for both. This article gives the details of how they differ from the other lease types.
Definition: Ground lease agreement usually permits the construction of a building on the lease by the tenant. The lease agreement will also stipulate conditions for the disposition of the building at the expiration of the lease term. The building, although built at the expense of the tenant, will legally belong to the land owner, unless otherwise stated in the agreement. In rare cases, it may be agreed that the tenant recovers the cost of the building, wholly or partly from the land owner, upon expiration of the lease period.
Definition: A leaseback is very simple really. Sometimes known as a sale/leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. The purpose of the leaseback is to free up the original owner's capital while allowing the owner to retain possession and use of the property. The type of property involved can be anything from residential or commercial real estate to equipment or vehicles.
Definition: Double Net Lease is a type of net lease in which the lessee (tenant) pays all or part of taxes and insurance associated with use of the property. These fees are paid in addition to monthly rent for use of the actual space.
Definition: A Net Lease is a type of commercial real estate lease in which the lessee (tenant) pays for their space, as well as for part or all of certain “Usual Costs” (expenses associated with operating, maintenance and use of the property) that the landlord pays.
Expenses incorporated into net leases may include taxes, utilities, janitorial services, property insurance, property management fees, sewer, water, and trash collection. Net leases almost always favor the lessor (landlord) and should be negotiated to include caps, or, the maximum amount a landlord can increase fees each year.
Definition: Fully Serviced Lease refers to a lease in which the monthly rent includes the cost of certain types of services, which may include janitorial services, trash collection, utilities, water and sewer charges, property taxes, etc.
Instead of the tenant opening their own service or utility accounts and directly paying for these costs, the landlord pays for the expenses, but includes an amount in the monthly rent to help off-set these costs.
Definition: The Modified Net Lease As a compromise between the gross lease and the triple net, the modified net lease is quite helpful in helping landlords and tenants to structure lease terms that work for both. This article gives the details of how they differ from the other lease types.
Definition: Ground lease agreement usually permits the construction of a building on the lease by the tenant. The lease agreement will also stipulate conditions for the disposition of the building at the expiration of the lease term. The building, although built at the expense of the tenant, will legally belong to the land owner, unless otherwise stated in the agreement. In rare cases, it may be agreed that the tenant recovers the cost of the building, wholly or partly from the land owner, upon expiration of the lease period.
Definition: A leaseback is very simple really. Sometimes known as a sale/leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. The purpose of the leaseback is to free up the original owner's capital while allowing the owner to retain possession and use of the property. The type of property involved can be anything from residential or commercial real estate to equipment or vehicles.
Three Triple Net (NNN) lease Sold
Reston, VA — Calkain Companies', a national real estate investment brokerage firm, has procured the sale of three triple net (NNN) lease investment properties including a Wendy's in Bowie, MD, M&T Bank in Maple Lawn, MD and a CVS in Fairfax County, VA totaling almost $10 million.
Rick Fernandez, Assistant Vice President of Calkain Realty Advisors', the private market division of Calkain Companies, led the marketing and sales for each of the transactions. Fernandez commented, "The Wash DC metro area has national appeal and the combination of strong performance by the tenants and high profile locations made these unique opportunities for the investors." Fernandez generated multiple offers for each of the assets and ultimately completed the sale of each transaction in an obviously challenging market. Jonathan Hipp, President & CEO of Calkain Companies continued, "Rick proved that quality real estate is highly desirable, no matter what market cycle is occurring." In each scenario, appropriate debt was placed on each asset and leveraging the properties with a supportive loan was an essential consideration for each buyer. Fernandez said," The availability of favorable financing is testament to the strength and stability of the Wash DC metro market."
Rick Fernandez, Assistant Vice President of Calkain Realty Advisors', the private market division of Calkain Companies, led the marketing and sales for each of the transactions. Fernandez commented, "The Wash DC metro area has national appeal and the combination of strong performance by the tenants and high profile locations made these unique opportunities for the investors." Fernandez generated multiple offers for each of the assets and ultimately completed the sale of each transaction in an obviously challenging market. Jonathan Hipp, President & CEO of Calkain Companies continued, "Rick proved that quality real estate is highly desirable, no matter what market cycle is occurring." In each scenario, appropriate debt was placed on each asset and leveraging the properties with a supportive loan was an essential consideration for each buyer. Fernandez said," The availability of favorable financing is testament to the strength and stability of the Wash DC metro market."
Casey's "Footlong" V/S Subway "Footlong"
The Footlong Battle
http://www.csnews.com/
ANKENY, Iowa -- Casey's General Stores is asking a federal jury to rule the word "footlong" is not the special property of Subway and its 12-inch-long sub sandwiches.
The c-store operator has filed a petition in U.S. District Court seeking a judgment that the term "footlong" is generic and violates nobody's trademark or patent, pending or otherwise, according to a report by The Des Moines Register.
Subway wrote Casey's a few weeks ago threatening legal action because Casey's is using the term "footlong" on signs and menus in one of its promotions, according to the newspaper. Subway has used the phrase "$5 footlong" or "five-dollar footlong" for advertising at its 34,000 stores in 93 countries for years.
Casey's, which has 1,600 stores in the Midwest, is in the process of rolling out a similar promotion. The retailer is now offering made-to-order sandwiches and is using the term "footlong" on signs and menus at 180 locations, according to the report.
http://www.csnews.com/
Retail Sales in U.S. Increased
Sales at U.S. retailers rose less than forecast in January, depressed by a drop in demand at building material stores and restaurants that may reflect the influence of harsh winter weather.
Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.5
http://www.bloomberg.com/
Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.5
http://www.bloomberg.com/
ING Sells Real-Estate Unit for $1 Billion
AMSTERDAM—ING Groep NV said Tuesday it will sell its real-estate investment-management business for around $1 billion, with the bulk being acquired by U.S. property manager and consultant CB Richard Ellis Group Inc.
The Dutch financial-services company said it will sell three units of ING REIM to CB Richard Ellis for $940 million, and that one U.S. business, Clarion Partners, will be bought for $100 million by Clarion's management and private-equity firm Lightyear Capital LL.
ING said the deal will lead to a gain of €500 million ($674.4 million) after tax, and that it expects it to be closed in the second half, subject to regulatory approval.
The sale of REIM isn't officially part of the disposal program imposed on ING by the European Commission—the European Union's executive arm—as a condition of receiving billions in government aid during the financial crisis.
http://online.wsj.com/article
The Dutch financial-services company said it will sell three units of ING REIM to CB Richard Ellis for $940 million, and that one U.S. business, Clarion Partners, will be bought for $100 million by Clarion's management and private-equity firm Lightyear Capital LL.
ING said the deal will lead to a gain of €500 million ($674.4 million) after tax, and that it expects it to be closed in the second half, subject to regulatory approval.
The sale of REIM isn't officially part of the disposal program imposed on ING by the European Commission—the European Union's executive arm—as a condition of receiving billions in government aid during the financial crisis.
http://online.wsj.com/article
Monday, February 14, 2011
Trump Entertainment Resorts on Fire!
Trump Entertainment Resorts on Fire! $38 million Dollars Deal..
Resorts Inc., the casino company taken over by bondholders through bankruptcy last year, agreed to sell the Trump Marina Hotel Casino to Golden Nugget owner Landry’s Inc. for $38 million.
The transaction is expected to be completed in the second quarter and is subject to a working capital adjustment, Atlantic City, New Jersey-based Trump Entertainment said today in a statement. Landry’s, a restaurant group taken private by its management last year, operates Golden Nugget casinos in downtown Las Vegas and Laughlin, Nevada.
From the first location in Katy, Texas, in 1980, Landry's continues to grow from coast to coast. As a result of its unwavering performance momentum, Landry's has been called a "darling" of Wall Street and has caught the eye of the restaurant industry press as well.
The company's renowned reputation is upheld by its unwavering commitment to customer service and satisfaction. This commitment is a promise made to each guest to ensure great food at a reasonable price and courteous service in a fun-filled atmosphere. From the moment a guest walks into one of our restaurants, the ambiance lets them know that they're in for something special.
A wave of recent accolades bestowed on the company has further propelled its phenomenal growth. Nation's Restaurant News, a leading industry publication, chose Landry's as "One of Nine Hot Concepts of the Nineties." In the financial arena, Business Week named Landry's as Number 26 of the "Top 100 Companies for Growth" and Forbes named Landry's number five on its roster of "The 200 Best Small Companies in America."
www.bloomberg.com
From the first location in Katy, Texas, in 1980, Landry's continues to grow from coast to coast. As a result of its unwavering performance momentum, Landry's has been called a "darling" of Wall Street and has caught the eye of the restaurant industry press as well.
The company's renowned reputation is upheld by its unwavering commitment to customer service and satisfaction. This commitment is a promise made to each guest to ensure great food at a reasonable price and courteous service in a fun-filled atmosphere. From the moment a guest walks into one of our restaurants, the ambiance lets them know that they're in for something special.
A wave of recent accolades bestowed on the company has further propelled its phenomenal growth. Nation's Restaurant News, a leading industry publication, chose Landry's as "One of Nine Hot Concepts of the Nineties." In the financial arena, Business Week named Landry's as Number 26 of the "Top 100 Companies for Growth" and Forbes named Landry's number five on its roster of "The 200 Best Small Companies in America."
www.bloomberg.com
The Richman's Family Expect Sale with Economy's Continued Rebound
NNN Lease Market News
This is the first installment in an occasional series on commercial real estate in downtown Washington.
At some point in the near future, possibly later this year, a downtown Washington landmark will change hands.
The Washington Trust building, which has anchored downtown Washington for the past 109 years, was put up for sale in April. While it's received some interest, no deals have been tendered.
But the family who owns it believes a sale will happen as the economy - and the weather - continue to improve.
In 1954, Ben Richman purchased the office building from Pittsburgh-based Peoples First National Bank and Trust. Today, it is owned by Washington Trust Building Corp., which is composed of Richman's sons, Stephen I. Richman and John W. Richman, and Stephen's wife, Audrey Richman.
The Richmans said recently that several interested parties looked at the building over the past year, and at one point, it appeared that an offer was forthcoming, but ultimately, it didn't materialize.
"We're waiting for a change in the weather and a change in economic conditions," Stephen Richman said.
By Michael Bradwell Business editor mbradwell@observer-reporter.com
NNN Lease Market Deals
NNN Lease Market News
Plant Ministries Inc. has purchased 1108 N. Orange Ave., Sarasota, from Alfred R. Robinson for $140,000. Carl Wise of Preferred Commercial Inc. represented the seller and Rico Boeras of Preferred Commercial Inc. represented the buyer.
Clayton Sutton has purchased 1103 30th Ave. E., Bradenton, from IB Property Holdings LLC for $40,345. Anthony Migliore and Sam Watkins of Coldwell Banker Commercial NRT handled the transaction.
LEASES
Square One Burgers & Bar has leased 5,300 square feet at 1737 S. Tamiami Trail from Two Barbers Inc. and 4,568 square feet from Benderson Development at University Park Center. John Caragiulo of Hembree & Associates handled the transactions.
ABPMC LLC, has leased 1,004 square feet at Midtown Medical Plaza, 1219 East Ave., Unit C204, Sarasota, from Gloria A. Goodman TTE and Rosser Goodman TTE as co-trustees. Rico Boeras of Preferred Commercial Inc. and Ian Black of Ian Black Real Estate, handled the transaction.
Dennis Boyer has leased 3,750 square feet of flex space at 7220 24th Court E., Sarasota, from Sallin Properties US Inc. Rico Boeras of Preferred Commercial Inc. handled the transaction.
MD Weight Loss LLC has leased the 1,700-square-foot unit at 1926 Hillview St., Sarasota, from Marilyn M. Saba. John B. Harshman of Harshman & Company Inc. represented the lessor and Charles Alloway of CB Richard Ellis represented the lessee.
Plant Ministries Inc. has purchased 1108 N. Orange Ave., Sarasota, from Alfred R. Robinson for $140,000. Carl Wise of Preferred Commercial Inc. represented the seller and Rico Boeras of Preferred Commercial Inc. represented the buyer.
Clayton Sutton has purchased 1103 30th Ave. E., Bradenton, from IB Property Holdings LLC for $40,345. Anthony Migliore and Sam Watkins of Coldwell Banker Commercial NRT handled the transaction.
LEASES
Square One Burgers & Bar has leased 5,300 square feet at 1737 S. Tamiami Trail from Two Barbers Inc. and 4,568 square feet from Benderson Development at University Park Center. John Caragiulo of Hembree & Associates handled the transactions.
ABPMC LLC, has leased 1,004 square feet at Midtown Medical Plaza, 1219 East Ave., Unit C204, Sarasota, from Gloria A. Goodman TTE and Rosser Goodman TTE as co-trustees. Rico Boeras of Preferred Commercial Inc. and Ian Black of Ian Black Real Estate, handled the transaction.
Dennis Boyer has leased 3,750 square feet of flex space at 7220 24th Court E., Sarasota, from Sallin Properties US Inc. Rico Boeras of Preferred Commercial Inc. handled the transaction.
MD Weight Loss LLC has leased the 1,700-square-foot unit at 1926 Hillview St., Sarasota, from Marilyn M. Saba. John B. Harshman of Harshman & Company Inc. represented the lessor and Charles Alloway of CB Richard Ellis represented the lessee.
Saturday, February 12, 2011
The Net Lease Market and Urban Investments Seem Set to Grow
NNN Lease Market News
The net lease market such as retail, sale leasebacks and urban investments seem set to grow. Numbers and analysis from the first quarter of 2011 point to better days and more opportunities ahead.
Retail
Retail sales in the first quarter 2010 are up 1.9% over the previous year. Retail transaction volume totaled $3.1 billion for the 1Q 2010, which is a steady improvement from $2.2 billion in the same period last year. Furthermore, according to a major commercial real estate magazine “investors are showing strong interest in well-stabilized retail properties that generate consistent cash flows”. This description fits perfectly with net lease investments, which are defined by their stability.
Sale Leasebacks
It has been estimated that there is at least $1 billion in corporate owned essential real estate and according to RW Baird “strong corporate demand for sale-leaseback transactions”. If only a fraction of this $1 trillion were to enter the market, it would be a huge boon for net leases. Sale-leasebacks, which are almost always structured as net leases, offer corporations a chance to pull vital equity out of their real estate and enhance current operations. The real estate is sold and a long term lease is signed which leases back the property. Sale leasebacks have already provided the basis for many net lease transactions in the last two years and that trend looks to continue to pick up steam.
Urban Investments
There has been a lot of talk about the upward trend in urban investments. Walgreens purchased Duane Reade and their 258 New York metro area locations for $1 billion and those leases have been recently valued at $74 million. The German group, GLL Real Estate Partners also entered the urban market by purchasing 14,000 sq. ft. of New York retail condominiums from Hines. The urban market is one the most attractive today because it ensures a properties close proximity to large populations. As a result, net lease urban properties have increasingly been in demand.
The net lease market such as retail, sale leasebacks and urban investments seem set to grow. Numbers and analysis from the first quarter of 2011 point to better days and more opportunities ahead.
Retail
Retail sales in the first quarter 2010 are up 1.9% over the previous year. Retail transaction volume totaled $3.1 billion for the 1Q 2010, which is a steady improvement from $2.2 billion in the same period last year. Furthermore, according to a major commercial real estate magazine “investors are showing strong interest in well-stabilized retail properties that generate consistent cash flows”. This description fits perfectly with net lease investments, which are defined by their stability.
Sale Leasebacks
It has been estimated that there is at least $1 billion in corporate owned essential real estate and according to RW Baird “strong corporate demand for sale-leaseback transactions”. If only a fraction of this $1 trillion were to enter the market, it would be a huge boon for net leases. Sale-leasebacks, which are almost always structured as net leases, offer corporations a chance to pull vital equity out of their real estate and enhance current operations. The real estate is sold and a long term lease is signed which leases back the property. Sale leasebacks have already provided the basis for many net lease transactions in the last two years and that trend looks to continue to pick up steam.
Urban Investments
There has been a lot of talk about the upward trend in urban investments. Walgreens purchased Duane Reade and their 258 New York metro area locations for $1 billion and those leases have been recently valued at $74 million. The German group, GLL Real Estate Partners also entered the urban market by purchasing 14,000 sq. ft. of New York retail condominiums from Hines. The urban market is one the most attractive today because it ensures a properties close proximity to large populations. As a result, net lease urban properties have increasingly been in demand.
Net Lease Cap Rates
Net Lease Cap Rates – All Markets Are Not Equal
What happened to cap rates in 2010? Rick Fernandez: The year started strong with investors returning to the market as interest rates fell and debt became available to a larger pool of investors. Unfortunately, the financial crisis in Greece and the potential for instability within the European Union quickly cooled the New Year’s optimism. The net lease market changed again in early July in part due to another drop in lending rates and a lack of quality supply of NNN properties. A more positive lending environment and improving market fundamentals along with the volatility of the stock market drove investors to look for more predictable and stable returns. In a few markets, cap rates began to compress dramatically. Sellers in these markets suddenly saw offers 50-100bps below the caps recorded at the beginning of the year.
What markets were particularly strong?
Rick Fernandez: Professionals in the net lease community agree that, from an investor’s perspective, first there is New York and Washington DC with Chicago and San Francisco trailing behind and then everywhere else. Those eager to invest quickly discovered that NNN properties in these markets were in short supply and properties of real quality were rarer still. The DC metropolitan region in particular is an extremely stable economy and investors from around the world have turned to the area for net lease investments. These investors viewed the DC metro area as one of the most stable markets in the world. International investors closed on bank and pharmacy deals in the DC metro area in 2010. The lease structure provided long initial terms with regular rent increases that, along with the investment grade credit rating of the tenants, offered a secure, stable and solid return on investment for the investors. The forecast remains strong and ULI in Emerging Trends In Real Estate 2011 predicts the DC area to be the top market for investing in 2011.
Rick Fernandez is Managing Director of Calkain Urban Investment Advisors. You can read the full report here.
What markets were particularly strong?
Rick Fernandez: Professionals in the net lease community agree that, from an investor’s perspective, first there is New York and Washington DC with Chicago and San Francisco trailing behind and then everywhere else. Those eager to invest quickly discovered that NNN properties in these markets were in short supply and properties of real quality were rarer still. The DC metropolitan region in particular is an extremely stable economy and investors from around the world have turned to the area for net lease investments. These investors viewed the DC metro area as one of the most stable markets in the world. International investors closed on bank and pharmacy deals in the DC metro area in 2010. The lease structure provided long initial terms with regular rent increases that, along with the investment grade credit rating of the tenants, offered a secure, stable and solid return on investment for the investors. The forecast remains strong and ULI in Emerging Trends In Real Estate 2011 predicts the DC area to be the top market for investing in 2011.
Rick Fernandez is Managing Director of Calkain Urban Investment Advisors. You can read the full report here.
Commercial NNN Lease Terms
General Terms and Definitions
In describing the manner in which services and expenses are paid by the tenant to the landlord, different commercial leasing terminologies are used. Though there is no limitation to the commonly-used terms in a contract, there are some common terms that are found in the majority of commercial real estate contracts. These include:
Net lease - As the term indicates, this is a rent payment that applies exclusively to real estate. This means that other potential operating expenses such as estate taxes, insurance, utilities, etc. are not incorporated in the rental amount as opposed to A Triple Net Lease is also known as Net Net Net Lease or NNN Lease. This is a type of net lease in which the tenant pays all or part of the taxes, insurance, and maintenance associated with use of the property. These fees are paid in addition to the tenant's regular monthly rent.
Triple Net leases almost always favor the landlord and should be carefully negotiated to limit how much the landlord can increase NNN fees each year.
Gross lease - This usually means that some of the operating expenses are included in the tenant’s payment, such as the real estate taxes. Optionally, building insurance and/or common area maintenance (CAM) could be included as well. Tenants should ask what this amount includes especially any of the escalation clauses included in the agreement.
Modified net lease - This is a term that is a compromise of the triple net lease and the gross lease terms. Usually, this is the term used when both parties enter into an agreement to split maintenance expenses, while the insurance and tax expenses would be shouldered by the tenant. This type of contract term is a common one for either side to easily consider because of its ability to be flexible and creative.
Full service lease - This term implies that the tenant’s payment incorporates all of the occupancy cost. This typically includes base rent, insurance, C.A.M., real estate taxes and even garbage disposal. In some instances, a full service lease may also include an additional charge for electricity.
In describing the manner in which services and expenses are paid by the tenant to the landlord, different commercial leasing terminologies are used. Though there is no limitation to the commonly-used terms in a contract, there are some common terms that are found in the majority of commercial real estate contracts. These include:
Net lease - As the term indicates, this is a rent payment that applies exclusively to real estate. This means that other potential operating expenses such as estate taxes, insurance, utilities, etc. are not incorporated in the rental amount as opposed to A Triple Net Lease is also known as Net Net Net Lease or NNN Lease. This is a type of net lease in which the tenant pays all or part of the taxes, insurance, and maintenance associated with use of the property. These fees are paid in addition to the tenant's regular monthly rent.
Triple Net leases almost always favor the landlord and should be carefully negotiated to limit how much the landlord can increase NNN fees each year.
Gross lease - This usually means that some of the operating expenses are included in the tenant’s payment, such as the real estate taxes. Optionally, building insurance and/or common area maintenance (CAM) could be included as well. Tenants should ask what this amount includes especially any of the escalation clauses included in the agreement.
Modified net lease - This is a term that is a compromise of the triple net lease and the gross lease terms. Usually, this is the term used when both parties enter into an agreement to split maintenance expenses, while the insurance and tax expenses would be shouldered by the tenant. This type of contract term is a common one for either side to easily consider because of its ability to be flexible and creative.
Full service lease - This term implies that the tenant’s payment incorporates all of the occupancy cost. This typically includes base rent, insurance, C.A.M., real estate taxes and even garbage disposal. In some instances, a full service lease may also include an additional charge for electricity.
American Realty Capital Properties Inc. Filed Plans for an Initial Public Offering of up to $110 million
NNN Lease Market News
American Realty Capital Properties Inc. filed plans for an initial public offering of up to $110 million, with plans to use the proceeds to repay debt and fund the acquisition of new properties.
The newly organized Maryland-based company, which intends to become a real-estate investment trust, intends to offer a minimum of 5.4 million shares and a maximum of 8.8 million shares of Class A common stock at $12.50 a share.
American Realty has been formed to own and acquire single tenant, freestanding commercial real estate that is net leased on a "medium-term basis," which means properties originally leased long term that are currently subject to net leases with remaining lease terms of generally three to eight years, on average.
As of Sept. 30, American Realty's portfolio consists of 63 single tenant, freestanding properties, located in 10 states and containing an aggregate of about 768,730 leasable square feet. The company's continuing properties are 100% occupied.
According to the company's filing with the Securities and Exchange Commission, the U.S. net lease market is "vast," comprising a wide range of property types and tenant operations and includes nearly every geographic market in the country. American Realty targets properties net leased to investment grade or other credit worthy tenants, which are typically larger companies operating at multiple locations.
The company has applied to list the shares on the Nasdaq Capital Market under the symbol ARCP.
http://online.wsj.com/
American Realty Capital Properties Inc. filed plans for an initial public offering of up to $110 million, with plans to use the proceeds to repay debt and fund the acquisition of new properties.
The newly organized Maryland-based company, which intends to become a real-estate investment trust, intends to offer a minimum of 5.4 million shares and a maximum of 8.8 million shares of Class A common stock at $12.50 a share.
American Realty has been formed to own and acquire single tenant, freestanding commercial real estate that is net leased on a "medium-term basis," which means properties originally leased long term that are currently subject to net leases with remaining lease terms of generally three to eight years, on average.
As of Sept. 30, American Realty's portfolio consists of 63 single tenant, freestanding properties, located in 10 states and containing an aggregate of about 768,730 leasable square feet. The company's continuing properties are 100% occupied.
According to the company's filing with the Securities and Exchange Commission, the U.S. net lease market is "vast," comprising a wide range of property types and tenant operations and includes nearly every geographic market in the country. American Realty targets properties net leased to investment grade or other credit worthy tenants, which are typically larger companies operating at multiple locations.
The company has applied to list the shares on the Nasdaq Capital Market under the symbol ARCP.
http://online.wsj.com/
Friday, February 11, 2011
The Day of Bargains in Net Lease Investments May be Coming to an End
Cap rates are an important economic indicator for the net lease market as they effectively reveal supply and demand of NNN investment property and the return investors expect for their NNN investments. Furthermore, when compared with Treasury Bills, NNN investment property and the Net leases behind them offer an interesting picture of the ebb and flow of credit and risk and a window into the behavior of lenders and investors alike.
If we think of Net Leases as a bond like asset backed by real estate and the credit strength of the tenant, we see that cap rates and T-bills move in opposite directions in response to the rise and fall of interest rates. The returns offered by T-Bills rise when interest rates fall. For NNN properties, a fall in interest rates has an opposite effect driving cap rates lower as the drop in the cost of debt makes a lower return tolerable to NNN investors. Said another way, T-bill rates typically rise during periods of business expansion and fall during recessions. The economic engine that drives up the return for T-bills typically drives down the return offered by Net lease investments. This effect is compounded as the competition amongst investors pursuing Net lease properties drives cap rates down even further.
So where are we today? It is still too early to tell but preliminary data for 2011 suggests that the steady rise in cap rates that began in 2009/2010may be leveling off. Lack of quality product, low interest rates and a very modest thaw of the frozen debt market may be responsible. Warren Buffet and others have pointed out that it is a fool’s game to try and time the market but the day of bargains in Net lease investments may be coming to an end.....
If we think of Net Leases as a bond like asset backed by real estate and the credit strength of the tenant, we see that cap rates and T-bills move in opposite directions in response to the rise and fall of interest rates. The returns offered by T-Bills rise when interest rates fall. For NNN properties, a fall in interest rates has an opposite effect driving cap rates lower as the drop in the cost of debt makes a lower return tolerable to NNN investors. Said another way, T-bill rates typically rise during periods of business expansion and fall during recessions. The economic engine that drives up the return for T-bills typically drives down the return offered by Net lease investments. This effect is compounded as the competition amongst investors pursuing Net lease properties drives cap rates down even further.
So where are we today? It is still too early to tell but preliminary data for 2011 suggests that the steady rise in cap rates that began in 2009/2010may be leveling off. Lack of quality product, low interest rates and a very modest thaw of the frozen debt market may be responsible. Warren Buffet and others have pointed out that it is a fool’s game to try and time the market but the day of bargains in Net lease investments may be coming to an end.....
Grubb & Ellis Forms Daymark to Manage NNN Realty's 33M SF Portfolio
Grubb & Ellis Company has established a new wholly-owned and separately managed subsidiary to manage its nationwide tenant-in-common (TIC) portfolio of commercial real estate properties managed by NNN Realty Advisors, Inc. (NNNRA), another subsidiary. NNN RA will be a direct wholly-owned subsidiary of Daymark.
In addition to managing NNN RA's 33 million square-foot property portfolio, Daymark intends to provide similar services for unaffiliated third party owners, including strategic asset management, property management, structured finance and loan advisory services to third party owners.
Daymark will be led by Steven M. Shipp, Daymark's President and Chief Executive, Paul E. Henderson, Daymark's Executive Vice President and Chief Financial Officer, and Jeffrey A. Gregor, Daymark's Executive Vice President and General Counsel.
Shipp previously served as Executive Vice President of Portfolio Management for Grubb & Ellis Realty Investors, LLC ("GERI"), a wholly-owned subsidiary of NNN RA, and before that was a regional vice president with Bank of America.Henderson Henderson Richmond , Virginia
The combined company will be headquartered inSanta Ana , CA
closing, the Grubb & Ellis Board will be increased to nine members which
will include six nominees from NNN Realty Advisors and three nominees from
Grubb & Ellis. Anthony W. Thompson, Founder and Chairman of the Board of
NNN Realty Advisors, will join Grubb & Ellis as Chairman of the Board. C.
Michael Kojaian, currently Chairman of the Board of Directors of Grubb &
Ellis, will remain on the Board of Directors of Grubb & Ellis. Scott D.
Peters, President and Chief Executive Officer of NNN Realty Advisors will
join the Grubb & Ellis Board of Directors.
Certain entities affiliated with the Chairman of the Board of Grubb &
Ellis Company, which collectively own approximately 39% of the outstanding
shares of Grubb & Ellis common stock, have agreed to vote their shares in
favor of the merger. Similarly, members of management and the Board of
Directors of NNN Realty Advisors who collectively own approximately 28% of
the outstanding shares of NNN Realty Advisors common stock have agreed to
vote their shares in favor of the merger.Grubb & Ellis' financial advisor with respect to the transaction. Grubb & Ellis' financial advisor with respect to the transaction was
JMP Securities LLC and NNN's financial advisor was Lehman Brothers Inc.
Grubb & Ellis' legal advisor with respect to the transaction was Zukerman
Gore & Brandeis, LLP and NNN Realty Advisors' legal advisor was Alston +
Bird LLP.
In addition to managing NNN RA's 33 million square-foot property portfolio, Daymark intends to provide similar services for unaffiliated third party owners, including strategic asset management, property management, structured finance and loan advisory services to third party owners.
Daymark will be led by Steven M. Shipp, Daymark's President and Chief Executive, Paul E. Henderson, Daymark's Executive Vice President and Chief Financial Officer, and Jeffrey A. Gregor, Daymark's Executive Vice President and General Counsel.
Shipp previously served as Executive Vice President of Portfolio Management for Grubb & Ellis Realty Investors, LLC ("GERI"), a wholly-owned subsidiary of NNN RA, and before that was a regional vice president with Bank of America.
The combined company will be headquartered in
closing, the Grubb & Ellis Board will be increased to nine members which
will include six nominees from NNN Realty Advisors and three nominees from
Grubb & Ellis. Anthony W. Thompson, Founder and Chairman of the Board of
NNN Realty Advisors, will join Grubb & Ellis as Chairman of the Board. C.
Michael Kojaian, currently Chairman of the Board of Directors of Grubb &
Ellis, will remain on the Board of Directors of Grubb & Ellis. Scott D.
Peters, President and Chief Executive Officer of NNN Realty Advisors will
join the Grubb & Ellis Board of Directors.
Certain entities affiliated with the Chairman of the Board of Grubb &
Ellis Company, which collectively own approximately 39% of the outstanding
shares of Grubb & Ellis common stock, have agreed to vote their shares in
favor of the merger. Similarly, members of management and the Board of
Directors of NNN Realty Advisors who collectively own approximately 28% of
the outstanding shares of NNN Realty Advisors common stock have agreed to
vote their shares in favor of the merger.Grubb & Ellis' financial advisor with respect to the transaction. Grubb & Ellis' financial advisor with respect to the transaction was
JMP Securities LLC and NNN's financial advisor was Lehman Brothers Inc.
Grubb & Ellis' legal advisor with respect to the transaction was Zukerman
Gore & Brandeis, LLP and NNN Realty Advisors' legal advisor was Alston +
Bird LLP.
M&T Bank Corp.'s Planned acquisition of Wilmington Trust Corp
M&T Bank Corp.'s planned acquisition of Wilmington Trust Corp. will result in more than 700 layoffs in Delaware, officials said Wednesday.
Buffalo N.Y.-based M&T announced in November that it would pay about $351 million for Wilmington Trust, which has been reeling from a deteriorating portfolio of commercial real estate construction loans.
Officials began notifying Wilmington Trust employees in Delaware on Wednesday that 721 of them will lose their jobs as the result of the merger, which will be voted on at special meeting of Wilmington Trust shareholders on March 22 in Wilmington.
Buffalo N.Y.-based M&T announced in November that it would pay about $351 million for Wilmington Trust, which has been reeling from a deteriorating portfolio of commercial real estate construction loans.
Officials began notifying Wilmington Trust employees in Delaware on Wednesday that 721 of them will lose their jobs as the result of the merger, which will be voted on at special meeting of Wilmington Trust shareholders on March 22 in Wilmington.
Office Properties Lease Reports 2010 Results
Brookfield Properties Corporation ("Brookfield Office Properties") ( BPO | PowerRating: NYSE, TSX) today announced that net income attributable to common shareholders for the year ended December 31, 2010 was $1,552 million or $2.73 per diluted share, compared with a loss of $220 million or ($0.52) per diluted share in 2009.
HIGHLIGHTS OF THE FOURTH QUARTER
Leased 2.2 million square feet of space during the quarter at an average net rent of $36 per square foot. Full year leasing totaled 6.9 million square feet, 1.5 times 2009's full year leasing activity and above the company's five-year average leasing total of 6.5 million square feet. Highlights from the quarter include:
New York -- 733,000 square feet
A new 10-year lease with Societe Generale for 444,000 square feet at 245 Park Avenue A five-year renewal with Bank of America/Merrill Lynch for 111,000 square feet at Newport Tower in Jersey City, NJ
Calgary -- 330,000 square feet
A 13-year renewal and expansion with Suncor Energy for 184,000 square feet at Suncor Energy Centre A 10-year renewal and expansion with West Coast Energy Inc. for 125,000 square feet at Fifth Avenue Place
Toronto -- 262,000 square feet
An 11-year renewal with HSBC Bank Canada for 109,000 square feet at HSBC Building
Houston -- 256,000 square feet
A nine-year expansion with BNP Paribas for 49,000 square feet at Three Allen Center
Los Angeles -- 220,000 square feet
A new 20-year lease with Target Corp. for 98,000 square feet of space at 7th & Fig retail center An eight-year renewal with Occidental Petroleum subsidiary Oxy Long Beach Inc. for 52,000 square feet at Landmark Square
Washington, DC -- 165,000 square feet
A new 15-year lease with Federal Retirement Thrift Investment Board for 55,000 square feet at 77 K Street, NE A 10-year extension and expansion with Institute of International Education for 41,000 square feet at 1400 K Street, NW
Reduced 2013 lease expiry exposure by leasing an additional 736,000 square feet subsequent to quarter end:
Leased 500,000 square feet to Bank of Montreal at First Canadian Place in Toronto. The renewal, which commences upon the original lease's expiry in 2013, will extend a further ten years to 2023. BMO maintains a separate lease in the building for over 500,000 square feet, also expiring in 2023, bringing its total occupancy at First Canadian Place to over one million square feet. Leased 236,000 square feet at Two World Financial Center in New York to OppenheimerFunds for a 15-year term, commencing upon expiration of its sublease with Bank of America/Merrill Lynch in October 2013. w.tradingmarkets.com
HIGHLIGHTS OF THE FOURTH QUARTER
Leased 2.2 million square feet of space during the quarter at an average net rent of $36 per square foot. Full year leasing totaled 6.9 million square feet, 1.5 times 2009's full year leasing activity and above the company's five-year average leasing total of 6.5 million square feet. Highlights from the quarter include:
New York -- 733,000 square feet
A new 10-year lease with Societe Generale for 444,000 square feet at 245 Park Avenue A five-year renewal with Bank of America/Merrill Lynch for 111,000 square feet at Newport Tower in Jersey City, NJ
Calgary -- 330,000 square feet
A 13-year renewal and expansion with Suncor Energy for 184,000 square feet at Suncor Energy Centre A 10-year renewal and expansion with West Coast Energy Inc. for 125,000 square feet at Fifth Avenue Place
Toronto -- 262,000 square feet
An 11-year renewal with HSBC Bank Canada for 109,000 square feet at HSBC Building
Houston -- 256,000 square feet
A nine-year expansion with BNP Paribas for 49,000 square feet at Three Allen Center
Los Angeles -- 220,000 square feet
A new 20-year lease with Target Corp. for 98,000 square feet of space at 7th & Fig retail center An eight-year renewal with Occidental Petroleum subsidiary Oxy Long Beach Inc. for 52,000 square feet at Landmark Square
Washington, DC -- 165,000 square feet
A new 15-year lease with Federal Retirement Thrift Investment Board for 55,000 square feet at 77 K Street, NE A 10-year extension and expansion with Institute of International Education for 41,000 square feet at 1400 K Street, NW
Reduced 2013 lease expiry exposure by leasing an additional 736,000 square feet subsequent to quarter end:
Leased 500,000 square feet to Bank of Montreal at First Canadian Place in Toronto. The renewal, which commences upon the original lease's expiry in 2013, will extend a further ten years to 2023. BMO maintains a separate lease in the building for over 500,000 square feet, also expiring in 2023, bringing its total occupancy at First Canadian Place to over one million square feet. Leased 236,000 square feet at Two World Financial Center in New York to OppenheimerFunds for a 15-year term, commencing upon expiration of its sublease with Bank of America/Merrill Lynch in October 2013. w.tradingmarkets.com
Broadstone Net Lease Completed the Acquisition of Five triple Net-Leased
Broadstone Real Estate, LLC today announced that Broadstone Net Lease, Inc. (BNL) recently completed the acquisition of five triple net-leased medical office properties for a combined purchase price of $18.4MM.
On January 14, 2011, BNL acquired four radiology centers in a sale and lease back transaction. The properties are located in the greater Tampa Bay, FL area. The four sites comprise more than 50,000 SF and are leased to Tower Radiology Centers for 15 years. Tower is the leading outpatient imaging provider in the Tampa Bay area with 11 locations and more than 30 radiologists.
On January 31, 2011, BNL also completed a sale and lease back transaction for the Plastic and Cosmetic Surgery Center of Texas. The 11,000 SF site is located in Plano, TX and is leased for an initial term of 15 years.
Broadstone Net Lease, Inc. is a private Real Estate Investment Trust (REIT) that invests in freestanding, single-tenant, absolute net-leased properties located throughout the United States. BNL now holds a diversified portfolio of medical office, restaurant, convenience store, specialty office and distribution centers, including 79 properties located in 21 states. It is currently targeting acquisitions in the $5 to $30 million range. The REIT is managed by Broadstone Real Estate, LLC which is certified as a Women's Business Enterprise by the Women's Business Enterprise National Council. Additional information can be found at www.BroadstoneRE.com.
On January 14, 2011, BNL acquired four radiology centers in a sale and lease back transaction. The properties are located in the greater Tampa Bay, FL area. The four sites comprise more than 50,000 SF and are leased to Tower Radiology Centers for 15 years. Tower is the leading outpatient imaging provider in the Tampa Bay area with 11 locations and more than 30 radiologists.
On January 31, 2011, BNL also completed a sale and lease back transaction for the Plastic and Cosmetic Surgery Center of Texas. The 11,000 SF site is located in Plano, TX and is leased for an initial term of 15 years.
Broadstone Net Lease, Inc. is a private Real Estate Investment Trust (REIT) that invests in freestanding, single-tenant, absolute net-leased properties located throughout the United States. BNL now holds a diversified portfolio of medical office, restaurant, convenience store, specialty office and distribution centers, including 79 properties located in 21 states. It is currently targeting acquisitions in the $5 to $30 million range. The REIT is managed by Broadstone Real Estate, LLC which is certified as a Women's Business Enterprise by the Women's Business Enterprise National Council. Additional information can be found at www.BroadstoneRE.com.
Sheetz Gets Ready to Set Up Shop
CLARKBURG, W.Va. -- The news outlet WBOY reported that Star City, W.Va. is one step closer to getting a Sheetz convenience store location.
This is an important step for the local city, as Star City Mayor, Bob Musick told the news outlet: "What we don't have here in Star City is commerce. We don't have a gas station in Star City. This is a tremendous opportunity for our community." He added that he hopes the new c-store will attract other businesses to the area.
The city council approved plans for the design and construction of the Sheetz store, to be located at the corner of Monogahela Boulevard and Boyers Avenue, and less than a quarter of a mile from another Sheetz location.
According to WBOY, construction will begin in August and span 16 months until completion.
This is an important step for the local city, as Star City Mayor, Bob Musick told the news outlet: "What we don't have here in Star City is commerce. We don't have a gas station in Star City. This is a tremendous opportunity for our community." He added that he hopes the new c-store will attract other businesses to the area.
The city council approved plans for the design and construction of the Sheetz store, to be located at the corner of Monogahela Boulevard and Boyers Avenue, and less than a quarter of a mile from another Sheetz location.
According to WBOY, construction will begin in August and span 16 months until completion.
Thursday, February 10, 2011
Council decides to lease former fire hall instead of selling building
The senior management team looked at the fact that there was some potential opportunities and feel they want to recommend at this point in time, a lease option for the fire hall and look for a tenant," Brown explained. "I understand there may be a requirement from council to see if there are other expressions of interest...but we want to get moving on it."
"The goal of any lease would be to have a triple-net lease," he added in his report to council. "This type of lease ensures that the tenant is responsible for all reasonable costs, including maintenance and repairs, insurance, utilities, etc. Any rental revenues could be used as council desires."
http://www.emckemptville.ca/
"The goal of any lease would be to have a triple-net lease," he added in his report to council. "This type of lease ensures that the tenant is responsible for all reasonable costs, including maintenance and repairs, insurance, utilities, etc. Any rental revenues could be used as council desires."
http://www.emckemptville.ca/
Wednesday, February 9, 2011
Tesco Has Completed a Sale-Leaseback Transaction
TSCO: 392.84
-3.16 (-0.80%)
20 shops and one site and mall under development have been sold for £685m for an average net initial yield of 4.7%.
The deal is a 50-50 joint venture with Tesco Pension Fund Trustees as a trustee of the Tesco PLC Pension Scheme. The transaction is primarily being funded by fixed rate notes issued by Tesco Property Finance 4 PLC. Tesco plc (LSE: TSCO) is a global grocery and general merchandising retailer headquartered in Cheshunt, United Kingdom. It is the fourth-largest retailer in the world measured by revenues after Wal-Mart, Carrefour and Metro and the second-largest measured by profits after Wal-Mart. It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia and Thailand.
The chain was founded by Jack Cohen in 1919. The brand first appeared after Cohen bought a shipment of tea from T.E. Stockwell and he used those initials and added the first two letters of his own surname. The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Originally a UK-focused retailer specialising in food and drink, it has diversified both geographically and by product, into areas such as clothing, electronics, financial services, telecoms, home, health, car and dental insurance, retailing and renting DVDs
A leaseback is very simple really. Sometimes known as a sale/leaseback or sale and leaseback, it is a transaction wherein the owner of a property sells that property and then leases it back from the buyer. A sale-leaseback transaction is a great alternative form of financing which allows business owners to fully maximize the value and position of their real estate assets.
Net Lease a better Investment Portfolio
Many investors are looking for a safe place to put their money with the wild fluctuations in the financial market. Stable, predictable investment vehicles are increasingly hard to find, but smart investors do have choices. One of the better choices is to invest in single-tenant, net leased properties, which many investors also call a corporate bond combined with real estate investments that still make sense today.
Triple net lease investments are just a number of the investment alternatives that many individuals are seriously considering today. With an NNN lease or a leaseback property investment, people have the option to invest in areas with quick and favorable returns on investment. A triple net lease is a viable option for most investors who are thinking of extending the scope of their portfolio. An NNN lease is a kind of lease arrangement in which the tenant, also called the lessee, becomes accountable for the expenses that are pertinent to the asset that is being leased along with the agreed upon amount for the lease’s rent. Because of the setup, the rent offered for the lease is typically lower than what one would expect from the particular property. Among the responsibilities that the lessee has to accept are the building insurance, common maintenance and area upkeep, and the real estate taxes on the leased assets. All the payments required are paid in net. There are many opportunities which can be beneficial in such situations, and investors should definitely explore such alternatives.
One additional alternative for most investors is the leaseback. A leaseback is a term in real estate related to a structure in which a property owner sells their own property while still staying and leasing it from the new owner. The United States is slowly coming into such alternatives today, which began as a popular thing among Europeans for some time now. Having a leaseback option, many people consider it to be better than getting a credit line that will require monthly payments. This procedure can be extremely rewarding for both the seller and the investor. However, the arrangement gives a lot of the risk on the entities buying the leaseback property. This makes it important to have a great deal of research accomplished prior to sealing the deal. There may be issues where the original leaseback property owner is coping with a lot of financial problems. There may also be instances where taxes and the IRS are involved. Investing in properties with such issues attached is undoubtedly a bad idea. Make sure that the property is well-kept and is properly managed financially first before purchasing anything.
Triple net lease and leaseback choices can certainly help people with developing a better investment portfolio. Checking out these options can definitely provide more returns while reducing investment risks at the same time.
Investing in net lease investments can be a profitable venture if carefully thought out and executed. The investment grade tenants that can fill your property make it a lower risk without all the hassles of owning other types of real estate investments. When considering lease options as a landlord or tenant, the full terms of the lease should always be read before committing. In the case of a triple net lease, make sure that all the terms are clear and agreed upon by both parties.
Triple net lease investments are just a number of the investment alternatives that many individuals are seriously considering today. With an NNN lease or a leaseback property investment, people have the option to invest in areas with quick and favorable returns on investment. A triple net lease is a viable option for most investors who are thinking of extending the scope of their portfolio. An NNN lease is a kind of lease arrangement in which the tenant, also called the lessee, becomes accountable for the expenses that are pertinent to the asset that is being leased along with the agreed upon amount for the lease’s rent. Because of the setup, the rent offered for the lease is typically lower than what one would expect from the particular property. Among the responsibilities that the lessee has to accept are the building insurance, common maintenance and area upkeep, and the real estate taxes on the leased assets. All the payments required are paid in net. There are many opportunities which can be beneficial in such situations, and investors should definitely explore such alternatives.
One additional alternative for most investors is the leaseback. A leaseback is a term in real estate related to a structure in which a property owner sells their own property while still staying and leasing it from the new owner. The United States is slowly coming into such alternatives today, which began as a popular thing among Europeans for some time now. Having a leaseback option, many people consider it to be better than getting a credit line that will require monthly payments. This procedure can be extremely rewarding for both the seller and the investor. However, the arrangement gives a lot of the risk on the entities buying the leaseback property. This makes it important to have a great deal of research accomplished prior to sealing the deal. There may be issues where the original leaseback property owner is coping with a lot of financial problems. There may also be instances where taxes and the IRS are involved. Investing in properties with such issues attached is undoubtedly a bad idea. Make sure that the property is well-kept and is properly managed financially first before purchasing anything.
Triple net lease and leaseback choices can certainly help people with developing a better investment portfolio. Checking out these options can definitely provide more returns while reducing investment risks at the same time.
Investing in net lease investments can be a profitable venture if carefully thought out and executed. The investment grade tenants that can fill your property make it a lower risk without all the hassles of owning other types of real estate investments. When considering lease options as a landlord or tenant, the full terms of the lease should always be read before committing. In the case of a triple net lease, make sure that all the terms are clear and agreed upon by both parties.
Commercial Real Estate Lending Spiked in The Fourth Quarter
Commercial-real-estate lending spiked in the fourth quarter of 2010, registering the largest quarter-over-quarter increase in new mortgages tied to commercial property since mid-2007, according to estimates released this week by the Mortgage Bankers Association.
In all, commercial mortgage originations were up 63% over the prior quarter, according to the MBA's originations index, which is based on a survey of lenders. In sum, 2010 saw $110 billion in originations of commercial mortgages—which include hotels, multifamily apartment buildings, retail and office—still a far cry from the $508 billion seen in 2007.
The market for commercial-real-estate lending, once frozen, has been thawing for the past half-year, as prices have risen some, particularly in major markets.
In all, commercial mortgage originations were up 63% over the prior quarter, according to the MBA's originations index, which is based on a survey of lenders. In sum, 2010 saw $110 billion in originations of commercial mortgages—which include hotels, multifamily apartment buildings, retail and office—still a far cry from the $508 billion seen in 2007.
The market for commercial-real-estate lending, once frozen, has been thawing for the past half-year, as prices have risen some, particularly in major markets.
By ELIOT BROWN
RBS Has Received a Handful of Bids for Spanish Real Estate Loans
By Marietta Cauchi, Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Royal Bank of Scotland Group PLC (RBS) has received a handful of bids for the GBP400 million worth of risky Spanish real estate loans, a person familiar with the situation told Dow Jones Newswires Tuesday.Morgan Stanley (MS), which is handling the sale, received the initial proposals at the end of last week and the bank is considering the proposals before fixing a date for the second round.
The package is part of a GBP1 billion portfolio of Spanish real estate loans which has been split in two -- the balance is made up of less risky assets which will be sold at a later stage.
Likely bidders for the Spanish portfolio include Blackstone Group (BX), Cerberus Capital Management and Apollo Management. Lone Star, Goldman Sachs (GS) Whitehall and Morgan Stanley's real estate fund could also be interested.
Monday, February 7, 2011
Funding net leases & Market Share
Funding net leases
Although mortgage brokers unfamiliar with this asset class may think this type of debt comes from sophisticated sources housed in a class-A skyscraper on Wall Street, the vast majority of loans for net lease investments come from banks.
Real Capital Analytics, a market-research company, recently reported that 51 percent of single-tenant acquisition transactions completed to-date in 2010 came from a traditional bank. It also reported, however, that 40 percent came from a national bank and 11 percent was from a regional or local bank.
It seems that when a recession hits, the lending environment changes to a point that sophisticated financing instruments are no longer needed to drive the market. Instead, individual relationships between borrowers, lenders and their conduits (i.e., mortgage brokers) are the primary source of transaction volume.
In addition, Real Capital Analytics reported that 30 percent of the transactions completed this past year used existing financing that was assumed by a new buyer. Anecdotally, investors active in the market at the beginning of this year did not have as many sources of capital. Those who made purchases that required financing were given financing quotes that were outrageous and did not allow the transaction to make sense to the investor. Therefore, they assumed the debt from the previous owner because the terms and interest rates were more favorable than the market at that time. Sourcing debt for net lease investments is becoming easier, however.
Gaining market share
Single-tenant properties have become so popular this past year that they comprised roughly 35 percent of all commercial real estate transactions completed in the first two quarters of the year, according to data from Real Capital Analytics. By comparison, when the market was at its peak in 2007, only 20 percent of all transactions included the asset class.
With more than $425 billion in total commercial sales in 2007 - which included $85 billion in single-tenant sales - compared to $35 billion in total sales for these past first two quarters - which included $12.25 billion in single-tenant sales - it is apparent that with fewer transactions, more people are steering toward stabilized and lower-risk properties.
Capitalization rates - or cap rates - are a quick snapshot of an investor's return. In today's market, cap rates are roughly 6 percent to 8 percent for creditworthy properties. When a basic comparison is made using other passive investments, it is fairly clear why investors are seeking to put their capital to work in the property type.
Most investors who have cash available to make passive, nonspeculative investments are using basic money-market or savings accounts to hold the cash. When returns for those investment vehicles hover around 1 percent, the investor is motivated to find alternative investments for that capital while also maintaining a steady and safe cash flow over a period of time. Net lease properties are filling that void.
Tracking trends
There are different periods where lenders will have a strong appetite for a particular tenant and less so for other tenants, and this changes over time. Brokers who stay on top of these kinds of trends in their markets and leverage their relationships with lenders can help clients find the best rates and terms at any particular moment.
As an example, Walgreen Co. drugstores - a common triple net lease tenant - have an S&P credit rating of A+. As such, lenders are comfortable with these stores' credit and viability as a longstanding tenant. At the beginning of this year, however, there were more than 450 Walgreens stores available for purchase as net- lease investments.
Because most investors need financing to purchase a single store and the average sale price for a Walgreens store is about $5 million, mortgage brokers were engaged to find the best debt. Lenders, however, found that they had too many Walgreens loans on their balance sheets and started to slow down the distribution of debt for that tenant. Brokers show their value in these scenarios by finding other lending sources that aren't as saturated with one particular tenant.
Supply and demand dictates the rate and terms of a particular tenanted-occupied building. Because of their popularity, Walgreens investments typically garner a higher interest rate. Other companies that have S&P credit ratings of A+ and similar lease terms, but higher price tags and therefore fewer buyers may have substantially lower interest rates.
Lenders, therefore, dictate rates and terms based not only on the tenant's credit, but also on subjective factors that move markets in different directions at different times. Mortgage brokers should be cognizant of these trends and have their arsenal of lending sources available for their clients as market indicators change.
Net lease properties have proven to be a strong asset class in this recovery -driven market. Lenders are seeking assets for their portfolios to maintain strong balance sheets. It's always better to have a stabilized net lease investment earning income for the lender and the investor on the books as opposed to vacant, speculative land that likely has an undetermined value for future development.
Mortgage brokers who focus on this asset class can take advantage of the new demand for these properties, as they are some of the only properties getting funded with rates and terms last seen at the height of the market.
Although mortgage brokers unfamiliar with this asset class may think this type of debt comes from sophisticated sources housed in a class-A skyscraper on Wall Street, the vast majority of loans for net lease investments come from banks.
Real Capital Analytics, a market-research company, recently reported that 51 percent of single-tenant acquisition transactions completed to-date in 2010 came from a traditional bank. It also reported, however, that 40 percent came from a national bank and 11 percent was from a regional or local bank.
It seems that when a recession hits, the lending environment changes to a point that sophisticated financing instruments are no longer needed to drive the market. Instead, individual relationships between borrowers, lenders and their conduits (i.e., mortgage brokers) are the primary source of transaction volume.
In addition, Real Capital Analytics reported that 30 percent of the transactions completed this past year used existing financing that was assumed by a new buyer. Anecdotally, investors active in the market at the beginning of this year did not have as many sources of capital. Those who made purchases that required financing were given financing quotes that were outrageous and did not allow the transaction to make sense to the investor. Therefore, they assumed the debt from the previous owner because the terms and interest rates were more favorable than the market at that time. Sourcing debt for net lease investments is becoming easier, however.
Gaining market share
Single-tenant properties have become so popular this past year that they comprised roughly 35 percent of all commercial real estate transactions completed in the first two quarters of the year, according to data from Real Capital Analytics. By comparison, when the market was at its peak in 2007, only 20 percent of all transactions included the asset class.
With more than $425 billion in total commercial sales in 2007 - which included $85 billion in single-tenant sales - compared to $35 billion in total sales for these past first two quarters - which included $12.25 billion in single-tenant sales - it is apparent that with fewer transactions, more people are steering toward stabilized and lower-risk properties.
Capitalization rates - or cap rates - are a quick snapshot of an investor's return. In today's market, cap rates are roughly 6 percent to 8 percent for creditworthy properties. When a basic comparison is made using other passive investments, it is fairly clear why investors are seeking to put their capital to work in the property type.
Most investors who have cash available to make passive, nonspeculative investments are using basic money-market or savings accounts to hold the cash. When returns for those investment vehicles hover around 1 percent, the investor is motivated to find alternative investments for that capital while also maintaining a steady and safe cash flow over a period of time. Net lease properties are filling that void.
Tracking trends
There are different periods where lenders will have a strong appetite for a particular tenant and less so for other tenants, and this changes over time. Brokers who stay on top of these kinds of trends in their markets and leverage their relationships with lenders can help clients find the best rates and terms at any particular moment.
As an example, Walgreen Co. drugstores - a common triple net lease tenant - have an S&P credit rating of A+. As such, lenders are comfortable with these stores' credit and viability as a longstanding tenant. At the beginning of this year, however, there were more than 450 Walgreens stores available for purchase as net- lease investments.
Supply and demand dictates the rate and terms of a particular tenanted-occupied building. Because of their popularity, Walgreens investments typically garner a higher interest rate. Other companies that have S&P credit ratings of A+ and similar lease terms, but higher price tags and therefore fewer buyers may have substantially lower interest rates.
Lenders, therefore, dictate rates and terms based not only on the tenant's credit, but also on subjective factors that move markets in different directions at different times. Mortgage brokers should be cognizant of these trends and have their arsenal of lending sources available for their clients as market indicators change.
Net lease properties have proven to be a strong asset class in this recovery -driven market. Lenders are seeking assets for their portfolios to maintain strong balance sheets. It's always better to have a stabilized net lease investment earning income for the lender and the investor on the books as opposed to vacant, speculative land that likely has an undetermined value for future development.
Mortgage brokers who focus on this asset class can take advantage of the new demand for these properties, as they are some of the only properties getting funded with rates and terms last seen at the height of the market.
Las Vegas are Expecting Commercial Foreclosures to be Fewer in Numbers
Business people in Las Vegas are expecting commercial foreclosures to be fewer in numbers in 2011 than residential foreclosures. They claim that commercial borrowers communicate better with lenders. ... Commercial Real Estate ... predicting that numbers will be lower compared with residential property foreclosures since commercial property owners communicate directly with lenders and banks, unlike residential property owners, who are forced to deal with middle people
Will Trader Joe’s acquire the 492,000-square-foot in WA
Trader Joes Buying in Sumner, WA?
The long-suffering industrial market is the source of much buzz this week thanks to the AMB Property/ProLogis merger. We’ll get to that after examining the chatter about a more tangible transaction: Will Trader Joe’s acquire the 492,000-square-foot Summit building at Sumner Corporate Park or do a build-to-suit?
TJ’s purchase of the Summit would signal a major expansion for the California grocer in the Northwest, where it now has 26 stores with one more opening in Spokane and another coming to Salem, Ore. TJ’s pursuit of a build-to-suit would mean happy days for builders in a market that has seen almost no new warehouse construction in the last year.
The long-suffering industrial market is the source of much buzz this week thanks to the AMB Property/ProLogis merger. We’ll get to that after examining the chatter about a more tangible transaction: Will Trader Joe’s acquire the 492,000-square-foot Summit building at Sumner Corporate Park or do a build-to-suit?
TJ’s purchase of the Summit would signal a major expansion for the California grocer in the Northwest, where it now has 26 stores with one more opening in Spokane and another coming to Salem, Ore. TJ’s pursuit of a build-to-suit would mean happy days for builders in a market that has seen almost no new warehouse construction in the last year.
Yum Brands Has Big Growth Plans in China
Yum Brands — The world's largest restaurant company: KFC, Pizza Hut and Taco Bell
The parent company of Taco Bell, KFC and Pizza Hut has big growth plans for 2011, especially in China and other emerging markets, but executives said during a conference call that they expect hurdles, such as commodities inflation and the effect of lapping a particularly successful 2010, to keep them on their toes. Yum is coming off a strong year, with fourth-quarter profit up 27% over the prior year. Chief Financial Officer Richard Carucci said Yum estimates its 2011 commodities costs will be up 4% in the U.S., 5% in China, and 3% in its international division, YRI.
While Yum's commodities contracts have it fairly locked in for the year, Carucci said, if food costs don't come down, the company has about $40 million of further exposure: $25 million in China and $15 million in the U.S.
Yum recently raised prices in China, to offset both commodities and wage inflation in the country, and said sales remain strong. Other companies, such as McDonald's Corp. (MCD), Yum's biggest fast-food competitor, have also been forced to increase their prices in China.Thanks to strong sales in China, the restaurant operator's fourth-quarter earnings climbed 26% to 63 cents a share, beating views for 60 cents. Total sales grew 6% to $3.56 billion, also above expectations.
In the U.S., Yum said it plans to grow its Taco Bell locations to 8,000 from 5,000.Yum! Brands, Inc., based in Louisville, Ky., is the world's largest restaurant company in terms of system restaurants with more than 37,000 restaurants in over 110 countries and territories and more than 1 million associates. Yum! is ranked #216 on the Fortune 500 List, with nearly $11 billion in revenue in 2009. Four of our restaurant brands – KFC, Pizza Hut, Taco Bell and Long John Silver's – are the global leaders of the chicken, pizza, Mexican-style food and quick-service seafood categories.
Article published by the Wall st Journal.-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@dowjones.com
While Yum's commodities contracts have it fairly locked in for the year, Carucci said, if food costs don't come down, the company has about $40 million of further exposure: $25 million in China and $15 million in the U.S.
Yum recently raised prices in China, to offset both commodities and wage inflation in the country, and said sales remain strong. Other companies, such as McDonald's Corp. (MCD), Yum's biggest fast-food competitor, have also been forced to increase their prices in China.Thanks to strong sales in China, the restaurant operator's fourth-quarter earnings climbed 26% to 63 cents a share, beating views for 60 cents. Total sales grew 6% to $3.56 billion, also above expectations.
Article published by the Wall st Journal.-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@dowjones.com
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