Monday, February 28, 2011

Stewart's Shops Sales Topple $1 Billion for Sixth Straight Year

SARATOGA SPRINGS, N.Y. -- Stewart's Shops sales grew by $100 million last year -- up 4 percent from $1.3 billion in 2009 to $1.4 billion in 2010. It marked the sixth straight year the convenience retailer's sales topped $1 billion, The Saratogian reported, citing a company announcement.

Blackstone Said to Buy Centro's U.S. Malls for $9.4 Billion

Blackstone Group LP, the world’s largest private-equity firm, agreed to buy Centro Properties Group’s U.S. shopping centers for $9.4 billion, two people familiar with the matter said.

The purchase of 588 malls, at the price they were valued at as of Dec. 31, may allow Centro’s Australian operations to continue as an independent company, said one of the people, who declined to be identified before an official statement. The deal may be announced as early as today, the person said.

Wednesday, February 23, 2011

Broadstone REIT Acquires Five Net-Leased Medical Office Properties for $18.4MM

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.

Friday, February 18, 2011

Houston's Piecemeal Deal

As recently as one year ago, many owners would have hesitated to put a property up for sale under such conditions. But lately investors have been bidding up prices of trophy properties.

"We feel this is an opportune time to test the market given the abundance of capital looking for core assets in top markets like Houston," Robert Merck, head of MetLife's real-estate investments, wrote in an e-mail. He confirmed that MetLife was selling a stake in the building, but he wouldn't say what size.

Partial sales are attractive strategies to landlords, partly because there is a lot of investor interest in trophy properties. Some office buildings in top markets are up over 40% in value by some measures since the market hit bottom in 2009.

Thursday, February 17, 2011

Google Grows In Ireland With EUR99.9M Building Buy

Google expanding its operations in Dublin by agreeing Thursday to pay EUR99.9 million for the city's tallest office building, in one of Ireland's largest property deals since the financial crisis.

The 67-meter Montevetro building in Dublin's Grand Canal Dock district, has 15 stories, 210,000 square feet of office space and can house about 2,000 staff.

Google Ireland head John Herlihy said the new building will give it extra space to relocate some teams at other Dublin sites, including its European headquarters on Barrow Street, and "have the space and flexibility to support our future operations.

Wednesday, February 16, 2011

Calkain Releases 4Q Net Lease Cap Report

The story of cap rate movement in 2010 is a tale of two trends. Beginning with promise and an increase in NNN deal making, the year quickly faded in the wake of poor global economic news – only to rebound and rally around mid-year in select markets (headlined by New York and Washington D.C.). Overall, cap rates in the second half of the year were lower than the first. In fact, sellers of credit rated NNN properties in core markets closed at cap rates rivaling the 2007 peak of the market. Numerous reasons have been offered as the cause but chief among these were a lack of quality supply, a more positive lending environment and improving market fundamentals.

Tuesday, February 15, 2011

CB Richard Ellis to Buy Majority of ING Real Estate Unit for $940 Million

CB Richard Ellis Group Inc., the world’s biggest commercial property broker, agreed to buy the majority of ING Groep NV’s global real estate investment management unit for about $940 million as the Dutch bank and insurer seeks to reduce property-related risk.

CB Richard Ellis will purchase businesses from ING Real Estate Investment Management, or REIM, with 44.7 billion euros ($60.5 billion) in assets, Amsterdam-based ING said in a statement today. ING also agreed to sell $100 million in equity stakes in REIM funds and the real estate investment management firm Clarion Partners. The U.S. company will be bought by Clarion management and Lightyear Capital.

Retail REO Expert Provides Tips for Dealing with Distress

Robert Carson, Executive Vice President of Levin Management Corp., discusses strategies that Receivers are using to increase the value of REO properties in the Retail sector.

Read the Full Story from Retail Traffic

Monday, February 14, 2011

Trump Entertainment Agress to Sell Atlantic City Marina Casino to Landry's

Trump Entertainment 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.

NNN Properties Experince Cap Rate Compression

The recent trade of five ground-leased pad cites provides an apt illustration of where cap rates are now in the Mid-Atlantic for triple net leased properties.

Read the Full Globe St. Story

Friday, February 11, 2011

Deal Signals Market Recovery

In 2007, before the financial world turned upside down, a condominium developer signed a contract to pay more than $33 million for a former assisted living facility in the heart of the West Village.

More than three years later, the developer, FLAnk, has closed on the purchase of the building on Hudson and West 12th streets. But, unlike scores of investors who walked from deals or renegotiated drastically lower prices with sellers after the crunch hit, FLAnk paid just a few million dollars short the full pre-crash price: $33.3 million.

After three years, a developer has closed on the purchase of a building at Hudson and West 12th streets.
.The deal is the latest sign that the city's residential development engine is beginning to crank up again. FLAnk was able to secure construction financing from Quinlan Development Group and M&T Bank to convert the property into 10 condos ranging from 3,300 to 9,000 square feet, according to Jon Kully, a principal at FLAnk.

Bank of America to Close Some Branches

Bank of America Corp., the biggest U.S. lender by assets, will close some retail branches this year and try to boost revenue from remaining locations by offering investment advice by videoconference, a company manager said.

The bank typically closes underperforming branches and will be “more conservative” about opening new ones, Walter Elcock, the executive responsible for the firm’s branches, said last week in an interview. He declined to say how many will be closed. The Charlotte, North Carolina-based firm plans trials this month of video conference rooms where Merrill Lynch associates dispense advice to customers from afar, Elcock said.

Thursday, February 10, 2011

Net Lease Fundamentals Improve, Increase in Transactions

Favorable conditions for investment in net lease properties led to a surge in transactions at the end of 2010.

Whole Foods Rises After Boosting Annual Profit, Sales Goals

Whole Foods Market Inc., the largest U.S. natural-goods grocer, surged the most in more than three months after raising its annual forecasts, buoyed by freer- spending consumers prepared to pay for healthy food.

Earnings will be as much as $1.80 a share in 2011, the company said yesterday after markets closed. That compared with a previous target of as much as $1.71. The Austin, Texas-based grocer also raised its sales growth forecasts for the year, citing increasing consumer confidence.

Three Suitors Left for Centro's U.S. Properties

Morgan Stanley’s global real estate fund is teaming with Barry Sternlicht’s Starwood Capital Group LLC to bid for U.S. shopping centers being sold by Australia’s Centro Properties Group, a person briefed on the plans said.

Centro said on Dec. 22 it had received several expressions of interest. Blackstone Group LP made a preliminary bid for some assets, a person with knowledge of the offer said in December. Centro, based in Melbourne, ceded control to its bankers at the end of 2008 and put its assets up for sale after an acquisition spree in the U.S. backfired as the credit markets seized up.

The person briefed on Morgan Stanley and Starwood’s plans asked not to be identified because the information is private.

Mark Lake, a spokesman for Morgan Stanley in New York, and Tom Johnson, a spokesman for Greenwich, Connecticut-based Starwood Capital, declined to comment. Stacy Slater, a New York- based spokeswoman for Centro, also declined to comment.

Wednesday, February 9, 2011

Best Buy May Switch to Wal-Mart-Style Everyday Store Pricing

Best Buy Co., the world’s largest consumer electronics retailer, may curtail three decades of tactical discounting and move instead to its own version of the everyday prices pioneered by Wal-Mart Stores Inc.

With Americans increasingly using smartphones to comparison shop, consumers are unwilling to wait for sales if they find better deals elsewhere, said Mike Vitelli, executive vice president and co-head of the North America division.

St. Joe Declines After Florida Developer Announces Plans to Explore Sale

St. Joe Co., the Florida developer criticized by hedge-fund manager David Einhorn, fell as much as 6.5 percent in New York trading after the company said it hired Morgan Stanley to explore a possible merger or sale.

St. Joe will consider a new business plan, partnerships, joint ventures, alliances, asset sales and acquisitions, the Watersound, Florida-based developer said yesterday in a statement. The announcement came a month after Bruce Berkowitz and Charles M. Fernandez of Fairholme Capital Management LLC, the company’s biggest shareholder, were named to the board.

“This is a prudent time to step to the sidelines,” Buck Horne, an analyst with Raymond James & Associates Inc., wrote in a note to clients today in which he cut the stock to “market perform” from “strong buy.” “A neutral investment position is appropriate until more details are revealed.”

Wall Street Boosts Borrowers as Real Estate Bond Market Returns

Randy Waesche was running out of time to retire debt he took on to build a Marriott hotel in downtown New Orleans. Then Citigroup Inc. showed up.

Waesche had spent six months seeking a more affordable alternative to terms being offered by his lender, a unit of Capmark Financial Group Inc. Citigroup was able to offer a better rate as the market for bonds tied to commercial mortgages revives following its 2008 collapse. The loan was completed in November, and was part of an $876 million securitized debt sale by Citigroup and Goldman Sachs Group Inc. in December.

North Valley Bancorp posts 4Q profit

REDDING, Calif. (AP) — Bank holding company North Valley Bancorp said Tuesday it posted a fourth-quarter profit because it did not have to set aside millions for loan losses and impairment charges.

The company reported net income of $2.3 million, or 33 cents per share, compared with a loss of $19.3 million, or $12.90 per share a year ago.

Analysts surveyed by FactSet expected a loss of 20 cents per share.

The Redding-based parent company for North Valley Bank did not record a provision for loan and lease losses in the fourth quarter ended Dec. 31. A year ago, the provision was $9 million.

It also had a $15.2 million impairment of goodwill charge in the year-ago quarter, but none in the current quarter.

Calgary's downtown office market experienced record leasing activity in 2010

CALGARY - Record leasing activity in the downtown office market in 2010 means job growth isn't far behind, says a commercial real estate expert.
Calgary's downtown office vacancy rate dipped to a low of 0.5 per cent in 2006 but then climbed to 15.7 per cent in 2009, said Savard. It ended 2010 at 14.4 per cent.
CITI is projecting the downtown vacancy rate to be 14 per cent this year and 12 per cent in 2012 despite the addition of the massive Bow tower project, and its 1.7 million square feet, and Eighth Avenue Place, and its one million square feet, to the office inventory.

Read more:

Colliers International Brokers Sale of 12 Hemenway Street in Boston

BOSTON– Colliers International has brokered the sale of 12 Hemenway Street in Boston for $4,750,000. Senior Vice President Leigh Freudenheim represented both the seller, Hostelling International Boston (HI-Boston), and the buyer, Hemenway Realty Ventures LLC.

HI-Boston, a non-profit organization that operates seven youth hostels throughout New England, will lease back the entire 22,000-square-foot building for approximately 18 months and continue to operate its hostel at the site. Hemenway Realty Ventures is currently in the process of determining the future use of the building for the period subsequent to HI-Boston’s occupancy.

Retail Development Remains Slow

The timing is perfect for anyone who wishes to sell NNN investment real estate. The lack of product and the 18 -24 month horizon for new product to enter the market means that even non credit NNN properties will draw the attention of investors.

"There are Massive Pools of Capital Out There"

With NNN inventory at its lowest point in the past five years will investors eager to enter the market begin to consider properties tenanted by local and noncredit national brands?

Tuesday, February 8, 2011

Calpers Shifting Focus to Stable Properties

Calpers, the California Public Employees’ Retirement System, is looking to shift the focus of its $15 billion real estate portfolio to more stable, income producing properties. Could this include a new interest in the net lease market?

Full Story

50 to 100 Municpal Bond Defaults?

Meredith Whitney has predicted “50 to 100 sizable defaults” of U.S. municipal bonds totaling “hundreds of billions of dollars”.

Monday, February 7, 2011

DC Market Offers Stability

The appeal of DC as a global tourist destination continues to drive the local economy. The data on hotel bookings as quoted in offers a testament to the strength of the DC metropolitan region. It provides yet another indicator of why investors seeking stable NNN assets are eager to acquire property in this market.

Full Story

Broadstone REIT Acquires Three Net-Leased Properties for $36M

Broadstone Net Lease (BNL) acquired three net lease properties totaling $36.1M:

  • The Unity at Ridgeway medical office property in Rochester, N.Y., a Class-A property master leased to Unity Health System for 20 years (four-story, 120,000 sq ft).
  • The 20,473 sq. ft. Guardian Urgent Care Center in Westminster, Colo. (initial lease term of 15 years).
  • A distribution center in St. Louis, Mo. (81,000 sq. ft) leased to Jeffco Trucking for an initial term of 20 years.

SunTrust Outparcel Sells for $4.4M

"PALM BEACH-In a move to cash in on a distressed redevelopment deal, Ram has sold the SunTrust Bank outparcel at its West Boynton Professional Center for $4.4 million."

Friday, February 4, 2011

Borders' Shares Have Tumbled

Bloomberg News, reported late Tuesday afternoon that Borders could file for bankruptcy protection as early as next week and close as many as 150 stores.
Borders' shares have tumbled 47 percent this week to close at a new 52-week low of 39 cents.

Borders, the nation's second-largest bookstore retailer, said on Sunday that it was postponing its payments to vendors, landlords and other parties this month in order to refinance or restructure its debts.

New REIT to Exclusively Purchase NNN Properties

Free and Clear Equity, Inc. (FACE) – A new REIT plans to raise $306M in an IPO and purchase nothing but NNN properties.

CoStar Agrees to $101MM Sale Leaseback

CoStar agreed to sale of their bldg in DC. They purchased it for $41MM last year and sold to a German fund for $101MM. Not a bad return for one year holding period. That IRR should be through the roof. CoStar signed a 15 year lease.

Yum Brands Has Big Growth Plans For 2011

Yum Brands — The world's largest restaurant company: KFC, Pizza 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;

Thursday, February 3, 2011

Mr. Slim says he is to invest $8.3bn in Latin America

Net lease Market News

Mexican tycoon Carlos Slim Helú says he is to invest $8.3bn in 19 countries, mainly in Latin America.

The bulk of the money, some $3.6bn, is destined for his businesses in Mexico, including telecommunications, mining and road-building.

Drug-related violence affecting some regions of Mexico was no reason to stop investing in the country, Mr Slim said.

Last year he knocked Bill Gates off the top of Forbes magazine's billionaire's list with a fortune put at $53.5bn.

The planned $3.6bn for Mexico, a 13% rise on last year, would go to a range of sectors, with the bulk going to telecommunications, Mr Slim told a news conference in Mexico City.

"Whoever doesn't invest, be it out of fear or caution, will be left behind," he said.

Mr Slim said he believed the Mexican economy would continue to grow in 2011 and 2012.
Carlos Slim Helú (Spanish pronunciation: [ˈkarlos eˈslim eˈlu]; born January 28, 1940) is a Lebanese-Mexican business magnate, philanthropist and the chairman and CEO of Telmex, América Móvil. His extensive holdings in a considerable number of Mexican companies through his conglomerate, Grupo Carso, SA de CV, Carso represented about 18 percent of Slim’s $65 billion in public holdings, according to data compiled by Bloomberg. About two-thirds of that wealth comes from Slim’s stake in America Movil SAB, Latin America’s largest mobile-phone carrier increased 26 percent in 2010. His net worth is now estimated at 74.5 billion dollars — 15.5 billion more than last year,Slim’s best earners were his stock in Latin American telephone behemoth America Movil, up 15 percent, and his 42-percent increase in holdings of financial giant Grupo Financiero Inbursa and Construction company IDEAL, up by 31 percent. Sentido Comun director Eduardo Garcia said that Slim probably has more investment in private companies that is not revealed so easily, and that the 74.5-billion-dollar figure was only a minimum guess at his riches, amassed interests in the fields of communications, technology, retailing, and finance.[2] As of April 2010, he is the wealthiest person in the world with a net worth of around US$53.5 billion. sourcers

Invest in Commercial Real Estate For Retirement Income

Any Time Is the Right Time to Get Into Net Lease Market For Retirement Income

2008 marks the first year when 78 million baby-boomers born between 1946 to 1964 start retiring. This is the first time in the US history that there is so many people who will be eligible for American Association of Retired Persons membership. So how will this affect you when it’s your turn to retire? And what should you do now? Since it has never happened before, you don’t have the benefits of learning from history. Let’s look at the big picture from 30,000 feet:

Uncle Sam is currently about $ 1.30 for every dollar they collect taxes. Since March 2008, the U.S. national debt to over $ 9,380,000,000,000 dollars, or about $ 30,894 per head exploded. The borrowing rate also increased, as he 2380000000000 $ Dollar has more debts are less than 4 years and the budget deficit for 2008 may be expanded to more than $ 500B. The government Accountability Office (GAO) warned of this type of fiscal policy is simply unacceptable!

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. Here's what you need to know about single-tenant, net leased properties: What is a single-tenant, net lease investment? A single-tenant, net-leased investment is typically a freestanding office, retail, or industrial building that is leased and occupied by one user or one company. Typically the tenant has committed to a long-term lease - usually longer than 10 years, and as long as 25 years with increasing rent over the lease term. What is a net lease? There are different types of leases for commercial property in the U.S. The two most common leases are full-service leases and net leases. A full-service lease means that the tenant is paying one base amount to the landlord/owner to occupy the space and the owner pays all the expenses related to the building including insurance and property taxes. With a full-service lease, the landlord/owner also is responsible for all maintenance related to the building. For example, if a thunderstorm damages the roof, the landlord/owner must pay for the repairs. In comparison, a tenant with a net lease is responsible for paying rent plus some or all of the operating expenses of the building such as taxes, insurance premiums, repairs, and utilities. Depending on how the leases are structured, they can be net-net leases or triple-net-leases. Specifically, in the case of a triple net lease, also known as NNN leases, the tenant agrees to pay all of the building's operating expenses, real estate taxes and insurance.

Square Footage: 3,119
Property Type: Restaurant, Retail
Lease Term: 15 yrs
Lease Structure: NNN
NOI: $159,178
Contact Broker: Rick Fernandez
Regarding Property: Arbys - Wake Forest, NC

Wednesday, February 2, 2011

The Wawa Net Lease Market

As a relative newcomer to the net lease market, Wawa convenient store gas stations are one of the hottest sought after triple net lease investment properties in the net lease market today. With an implied credit rating of BBB- / outlook Stable, most investors understand the credit-worthiness of
this privately owned company, which is considered one of the strongest convenient store operators in the country. In 2009, Wawa was ranked No. 55 in Forbes’ America’s Largest Private Companies list. Wawa currently operates more than 570 convenient stores throughout the mid-Atlantic, 270+ of which include gasMost Wawa net leases properties offer an investor long-term security and absolutely no management responsibilities in the form of a 20-year primary term nnn ground lease. These ground leases provide additional investment security given the nature of the real estate investment made by Wawa’s real estate team, including the Wawa Engineering and Construction Department which is responsible for the design, engineering and construction of all new stores and remodels. As with any ground lease investment, a landlord should be comforted by the fact that the tenant, in this case Wawa, has made a significant capital investment in the construction of the building, which at the end of the lease will become property of the ground lease owner.
Also driving the demand and value of Wawa net lease properties is the strong real estate fundamentals of the property sites. Wawa’s real estate team has specific site select criteria, which focus on key trade area location characteristics. Wawa net lease properties are typically located at signalized corners and out-parcel/pads of shopping centers with good visibility and ingress/egress. Ideal trade area characteristics include adequate population and minimum traffic counts of at least 25,000 vehicles per day. Sites should be located on high-volume intersections near other commercial traffic generators.

Wawa's namesake is a Native American word for the Canada Goose in flight, which is also incorporated into the company's logo. Wawa owns and operates convenience stores and gasoline stations in Pennsylvania, New Jersey, Delaware, Maryland, and Virginia. These stores offer a fresh food selection under the Wawa brand including deli products, wraps, breakfast sandwiches, bakery products, fresh produce, and dairy products. The first Wawa store opened in April 1964 in Folsom, Pennsylvania.

Tuesday, February 1, 2011

Net Lease Investment Medical/Retail Center Offered for Sale

Reston, VA - Calkain Companies, a national single tenant net lease investment brokerage firm, has been named the exclusive advisor for the sale of Cedar Creek Station, a retail strip center in Strasburg, Virginia.

The investment sales team will be led by Betty Friant of the Calkain Realty Advisors. The property is listed for sale with an asking price of $2.85M, which provides an initial cap rate of 8.88%, with predominantly medical tenants.

The property is located in a gateway entrance to Strasburg, at an interstate intersection and near Virginia's Inland Port. Newly constructed in 2009, this modern brick professional complex includes 15,000+ sq ft of space. The property currently offers a well-located and highly visible home to numerous retailers and various medical practices.

Strasburg is situated in the top of Virginia, approximately one hour west of the urban concentration of Northern Virginia and Washington DC. The area is the Mid-Atlantic crossroads for Interstates 81 and 66. Interstate 66 provides easy access to points east including Washington, D.C. and Baltimore. Interstate 81 travels north-south the entire length of Shenandoah County, with nine interchanges including one at I-66, north of Strasburg.

Cedar Creek Station is strategically located along Old Valley Pike near the intersection of Interstate 81 and Route 11, just sound of Interstate 66. There are over 100,000 residents living within a 15 mile radius. The surrounding area includes lodging, industrial complexes and a retirement community.
Investors interested in net lease investment NN’s are more likely to have a passion about their business. They want to inform clients, grow their customer base and put their name on the Net lease market, while investors interested in NNN’s are more likely to be concerned purely with the profitability of the buildings.

For More Information Please Contact

Triple-Net-Lease Properties Returns are More Favorable

Triple-net-lease properties' returns are more favorable and more secure than some traditional investment vehicles

By: David Sobelman, Executive Vice President, Calkain Cos.

As published in Scotsman Guide's Commercial Edition.

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.