Mid Atlantic Real Estate Journal — Fall Preview — September 28 - October 11, 2012 — B
www.marejournal.com
N et L ease I nvestments
By Jonathan W. Hipp, Calkain Companies Net Lease Property Holders – Now is the time to sell!
T
he net lease market is currently highly advantageous for the
urban properties provide a stable income stream with real upside potential that far
January 1, 2013 unless the President and Congress step in to extend or amend this
of 20%. This is effectively a 33% tax increase to the selling entity. For property owners
of these advantages are not likely to exist for long. Inter- est rates are at historic lows today but many predict them to rise in the near future. Lack of construction has led to a dearth of properties but the wheels of development are slowly getting underway again. And finally, we may not see a lower capital gains tax rate for many years once the current 15% rate expires. Potential net lease sellers will not likely ever see such an ad- vantageous environment. Jonathan W. Hipp is president/CEO of Calkain Companies. n
p o t e n t i a l seller. De- mand for net lease proper- ties – espe- cially credit tenants in prime loca- tions - heav- ily outweighs supply. Cap
The entire net lease market has seen compressing cap rates. A combination of multiple factors has led to this declining cap rate environment. First, low interest rates and a low yield investment environment have heavily impacted cap rates. Because cheap debt is available and the risk free investment returns are so low, investors are able to pay premiums (lower cap rates) for net lease assets and still achieve a spread that is appealing in today’s market.
Jonathan W. Hipp
exceeds anything offered by a suburban pad site in the shadow of a big box store. Another important event on the horizon is the expiration of the Bush Administration tax cuts - set to expire on
legislation. Presently the tax rate for sellers of income producing real estate is 15% in capital gains tax. Unless something is done prior to year end 2012, the capital gains tax rises to a minimum
who hope to avoid this tax hit – the time to sell is quickly dwindling. This current collusion of factors has uniquely given net lease sellers high negotiating leverage. Furthermore, some
rates are dropping to lev- els not seen since 2007 and more investors are getting comfortable with franchisee credit, shorter lease terms, or private non-rated companies. In short, we could be witness- ing an historic sellers market that intelligent investors should take advantage of. The entire net lease market has seen compressing cap rates. A combination of mul- tiple factors has led to this de- clining cap rate environment. First, low interest rates and a low yield investment environ- ment have heavily impacted cap rates. Because cheap debt is available and the risk free investment returns are so low, investors are able to pay premiums (lower cap rates) for net lease assets and still achieve a spread that is ap- pealing in today’s market. Unlike the 2007 environment where interest rates hovered in the mid to high 4.00% range – current interest rates are below 2.00%. This en- vironment has fostered an unbalanced demand for net lease properties. Furthermore, there is lim- ited net inventory available due to the fact that retail slowed their expansion and growth plans since 2008. It’s no secret that construction fell to a near standstill during the recession and even today has not recovered. This has created an ever dwindling pool of net lease investments on the market. Finally, with a flight to quality by investors the sim- ple fundamentals of supply and demand are driving cap rates lower. Among the most demanded properties are well situated urban retail within high traffic locations in diverse residential, of- fice and retail communities. These provide investors with broadly adaptable real estate – ensuring a long lasting intrinsic value. High quality
Introducing : SLS 2012: SALE LEASEBACK SUMMIT 2012 October 25, 2012 | Yale Club | New York City
Why Attend Sale Leaseback Summit 2012? Sale Leasesback Summit is a full-day, high-level event. The industry’s most active and innovative investors are expected to attend, as ZHOODVUHWDLORI¿FHDQG industrial tenants who have monetized their assets to share in case studies, and tenants who would like to learn more. The summit provide unique networking opportunities for investors and tenants to develop new relationships.
Here from 30+ speakers who will address key themes in the sale leaseback arena, including: t Who are the most active sellers in the sale leaseback areana today and what are their reasons for monetizing real es- tate assets? t Why should current owners consider monetization? What are the unique ben- efits and rewards? t Who are the most active buyers in the sale leaseback area?What are the unique investor-tenant relationships in this sec- tor? t Will the industry see additional sale leaseback activity as the economy con- tinues to recover, and why? This innovative forum will explore all types of real estate monetizations in the various property types, including medical/health- care, office, retail and industrial.
Following a modest investment sales year in 2011, REIT buying power is poised to drive the next wave of sale leaseback ac- quisition activity in the various propery types: office, retail, industrial. In fact, REITs raised a record amount of capital in 2011. How they plan to deploy capital and its impact on sale leaseback activity, and the myriad of new investment opportunities will be discussed at the inaugural Sale Leaseback Summit . The event will be held on October 25th at the prestigiuos Yale Club of New York and is expected to bring together 250+ leading investors, financiers, tenants and industry service providers.
MORE INFORMATION info@cre-events.com | http://cre-events.com/sls2012
M E Z Z A N I N E S P O N S O R
To discuss Sale Leaseback opportunities, call Jonathan Hipp on (703) 787-4714 Find out more at www.calkain.com
AMERICA’S NET LEASE COMPANY TM
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