return and low portfolio volatility.
Despite the current conditions, the
acquisition landscape is a far cry from
what it was at the height of the credit
bubble, when Real Capital Analytics
tagged 2007 sale-leaseback volume at $15
billion. “At that time, net-leased assets
were very popular investments for people
doing 1031 exchanges,” says New York
City-based Benjamin Harris, managing
director and head of North American
investments for W.P. Carey & Co., which
acquired the New York Times Co.’s
750,000-square-foot headquarters for
$225 million last year.
“People were selling operationally
intensive assets, like multifamily properties in California and Arizona, and then
buying single-tenant net-leased assets
because they could defer the tax hit and
also avoid a lot of operational overhead,”
Harris relates. “Today, we have not seen
those 1031 investors come back into the
market. Instead, there has been a return
to the traditional net lease investors—
institutional funds that are investing in
sale-leasebacks to own stabilized, long-term assets.” One thing is for sure, he says:
“It’s not going to be business as usual.” ◆
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Demand for credit-rated property in the urban
cores of primary markets has always been strong,
but there are now local, non-credit tenants involved
in smaller deals that have caught the eyes of investors, many of whom have shown a willingness to
pay aggressive cap rates for urban assets. To that
end, Calkain Cos. Inc. has formed an urban net
lease division in an effort to dominate the downtown trend. According to Calkain’s president and
CEO, Jonathan Hipp, the firm is the first to identify
and capitalize on urban net lease opportunities.
“An increase in mixed-use residential condo-
miniums and a pause in expansion by national
retailers has contributed to the wide-ranging
demand for triple-net urban properties,”
says Rick Fernandez, who will spearhead
the new division, Calkain Urban Investment
Advisors, as managing director. “Investors
seeking passive real estate investments
are turning to urban, income-producing
condos of varying types as a suitable
component of their investment portfolios.”
He adds that an income-producing,
triple-net property—whether a condo-
minium, zero-lot line structure or a com-
bination of the two—often provides a
price point unavailable to the average
12%
10%
8%
Rate (%)
6%
4%
2%
0%
investor hoping to acquire a downtown investment
property. What’s more, retail condominium units,
such as a typical strip center, benefit from a strong
anchor or even a shadow-anchored presence.
“A unique aspect of urban properties is that the
anchor can be a dense concentration of office
space or even a metro station because the flow of
subways, buses, cars and pedestrians is the engine
that drives the street scene,” Fernandez observes.
Calkain currently has a handful of deals in the
works but none have closed recently. “There has
been a lot of activity over the past 18 months,” he
says, “but it’s really this trend toward urban investment that prompted us to create the division.”
6%
5%
4%
3%
2%
Spread (%)
1%
0%
January 2001 - December 2009
Average Cap Rates 10- Year Treasury Spread
Source: Jones Lang LaSalle
Closed $200M in first quarter deals
35+ years of
sale-leaseback
investing
experience
Done deal
Your Property Our Capital
Funding
available for
new acquisitions
For more information about W. P. Carey, please contact:
Benjamin P. Harris • Head of Domestic Investments
T: 212-492-8916 • E: bharris@wpcarey.com
www.wpcarey.com
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