Apr
14

Net Lease Demand is Crazy Strong

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NNN wanted signDemand for net lease investments is not only strong, it shows no sign of weakening, according to investors in the space who will speak on the state of the capital markets at RealShare Net Lease, taking place here later this week.

“We have a pretty significant imbalance of supply and demand,” notes W. Kyle Gore, managing director & principal, CGA Capital Corp. “Demand from debt and equity investors for credit leased back transactions—particularly where the credit is investment grade or higher—far exceeds the supply.”

That imbalance, and low interest rates, he adds, “have conspired to create a frenzy for great deals and to create demand for deals that in the past would have been marginal.”

Gore is seeing investors lower yield requirements or even “start giving up structure requirements. For example, net lease REITS are accepting shorter base lease terms than what the market demanded historically, exposing their investors to more residual value risk and more lease renewal risk than the net lease market had accepted in the past.”

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