Real Estate Forum - April 2012

Net Lease Review
Getting the Best
Piece of the Pie

Net leased
assets are
among the
most highly
sought-after

By Carrie Rossenfeld

investments in this
market. But in a
packed playing field,
what’s the best way
to score a good deal?

Some of today’s most
active players share
the keys to their
success.

By Carrie Rossenfeld

It’s no secret that the net lease market is attracting many investors, new and vet- eran, seeking a safe sector for their portfolios. While there’s no sure thing in the investment realm, net lease does have its pluses, including long-term tenants assuring a steady income stream. But with so many players in the market looking for a great deal, how can savvy investors stay ahead of the pack and land the best net lease transactions? Real Estate Forum spoke with several industry experts to get their take on the net lease market and how to make smart choices when making acquisition decisions.

“Things are getting competitive,” says
Jason Fox, managing director and co-head
of domestic investments with W. P. Carey in
New York City. “We have a low-interest rate
environment and despite aggressive pric-
ing, it’s inducing a lot of sales. A lot of users
are considering sale-leasebacks, and pri-
vate-equity firms are considering them for
their portfolio companies as a way to access
capital to finance growth and expansion.”
On the flip side, Fox adds, the market is
also competitive for investors. Property yields
have been driven down, and pricing that
resembles 2007 is emerging. “There are
good opportunities, though,” he says, “in a
range of asset classes including retail and
restaurants, despite the aggressive bidding
out there. The good news compared to 2007
is that you’re still able to generate appropri-
ate risk-adjusted rates of return for this type
of investment, given the spreads between
property yields and lending rates.”
Brandon Duff, director of the Chicago
office for Stan Johnson Co., says staying
educated about the market is key to remain-
ing ahead of the competition: “Look for
both good and bad. It’s also important to
understand the debt markets and how they
impact pricing.”
Knowing which market you want to be in
is part of the education process, and it’s
vital for net lease transactions. “You need to
be an expert in the market you’re focused
on,” says Nicholas Schorsch, chairman and
CEO of American Realty Capital in New
York City. “For example, if you’re looking
for long-term income in net lease space, do
you want to buy industrial, retail or office?
There are different types of net leases like
there are different types of restaurants.”