National Single Tenant Insider
Spring 2018
Greetings!

Net lease investors – welcome (almost!) to Spring! A lot has happened in the world since our last newsletter: Toys’R Us is going through bankruptcy, Rex is out and Larry is in, and one of my favorite shows, “Scandal” is in its’ final season. However, the good thing about net lease investments is that they are here for the long haul with steady, long-term leases and sustained income. As we enter Spring, I wish you great success in your commercial real estate endeavors. Let’s keep in touch!

Best regards, Nancy
Nancy Miller, CCIM
President
Net Lease Investments
Bull Realty, Inc.
404-876-1640 x 118
NMiller@BullRealty.com
IN THIS ISSUE:

  • Market Update
  • Industry Soundbites
  • Ask Nancy
  • Recent Sales
  • Acquisition Opportunities
  • Properties Wanted
Market Update
Net Lease Properties Offer Long Term Stable Investor Returns

Bull Realty recently reviewed three different investment vehicles to learn how single tenant net lease investments fare. Average rates of return for corporate bonds, stock market performance (S&P 500) and single tenant net lease real estate returns are compared with the time horizon of 1990 to the present as shown in the chart below.
Long-term Returns – 1990 - 2018:

Corporate Bonds: 5.99% ( Source: ycharts.com)
Stocks: 11.52% ( Source: Morningstar)
Single Tenant Net Lease Investments: 8.04% (cash on cash returns exclusive of the impact of debt service on returns) ( Source: Costar)

What can investors observe from this?

  1. Stock Market Volatility: The stock market showed the highest volatility with highs and lows ranging from a (-37%) down market in 2008 and to highs in the market of +32.4% in 2013. Investors, nervous with this volatility, may have sold stocks in a trough, only to miss a future rise in value.  
  2. Corporate Bonds: Over this period, the average return for corporate bonds of 5.99% is certainly lower than stock market returns, but the trend line shows long term stability.
  3. Single Tenant Net Lease Investments: The average returns over this period are 8.04%. 

From a strategy perspective, these long-term returns show the merit of investors to diversify their portfolios. An investor that can tolerate the ups and downs of the stock market will realize the highest returns. However, investors seeking safe, long term benefits of tangible ownership in real estate have many additional benefits with consideration of single tenant net lease properties.

Why consider single tenant net lease investments?  

Single tenant net lease investments enable investors to:

  • Enter stable, long term leases.
  • Have little or no need for any oversight – we call it “mailbox money!”  
  • Control financial risk associated with vacancy by selecting tenants that have a proven track record and financial strength.
  • Invest in quality real estate that could have long term appreciation potential in addition to the revenue stream in the lease itself.
  • Take advantage of the tax benefits of owning investment real estate including depreciation and replacing properties in an IRS 1031 exchange – strategies that can’t be done with stocks or bonds.

The strategic “take-away”:

The take-away for investors of any type is to understand the nature and volatility of their investment choices and strategy. Consider diversification to mitigate risk and protect investment portfolios from dramatic swings in the market. Utilize long term, stable net lease investment properties to do so. 

To learn more about strategically considering and utilizing single tenant lease investments in your portfolio, contact:

Nancy Miller, CCIM/MBA
Industry Soundbites
5 of the best restaurants to work for

According to Glassdoor, the following restaurants are some of the best places to work nationwide:

  1. In-N-Out Burger
  2. Kimpton Hotels & Restaurants
  3. Chick-fil-A
  4. Darden
  5. Starbucks
Should Net Lease Investors Worry About Convenience Store Tenants?
A recent study by Moody's Investors Service found that convenience stores will achieve total sales of $73 billion and total sales growth of 5.5%. This is actually on the low end of the spectrum for the sub-sector and may indicate that the advantage may be shifting away from the seller in the net lease sector...

Source: National Real Estate Investor
Dunkin Brands Group announces 3 year growth plan

Dunkin Brands Group plans to add 1000 new locations in the US by the end of 2020 with more than 90% built outside their traditional footprint of the NE. The ultimate plan is to have 18,000 Dunkin’ Donuts restaurants in the US. From donuts to dollar stores, they will be everywhere! 

Source: Convenience Store News

Rite Aid to be Acquired by Grocer, Albertson’s

Albertson’s, part of a private equity firm, Cerberus Capital Management, who also operates Safeway, Super Saver and some other supermarket chains plans to purchase many of the Rite Aid’s that are not being sold to Walgreen. The current Albertson’s pharmacy’s will be re-branded to the Rite Aid name and Rite Aid will continue to operator it’s stand-alone pharmacies. This will enable the Albertson’s group of stores to consider going public in the near term. The merger is expected to be approved and closed by mid 2018. Read more

Source: Chain Store Age
Ask Nancy
Marshall from SC:  “We see interest rates are starting to creep up. We are thinking about purchasing another net lease property.  Should we wait to see if cap rates will increase so we can get a lower price?”

Marshall,

Interest rates will rise slowly. CAP rates will likely rise 6 or more months after increases in interest rates. So, if you are financing your net lease property, we suggest that you DON’T WAIT. Interest rates are still very low and that will mean more to you, for fear of missing out on a good property. However, if you are an ALL CASH buyer and do not have to purchase now, cap rates will likely go higher in the next 12 months. BE AWARE that there still is a shortage of quality single tenant properties and you may not want to wait to miss a good one while waiting for prices go down. That is a risk you must consider.
Recent Sales
  • Hardee's - Nancy Miller of Bull Realty represented the buyer in the sale of this Hardee's located in Paris, TN. The February 2018 transaction sold for $2,164,246 at a 6.5% cap rate with over 17 years remaining on a 20-year NNN lease with options.

  • Family Dollar - Nancy Miller of Bull Realty listed and sold this Family Dollar located in Summerville, South Carolina in December for $2,232,500 at a 6% cap rate with 15 years remaining on a NNN lease.

  • Christian Brothers - Nancy Miller represented the buyer in the sale of this Christian Brothers located in Goose Creek, SC. The December 2017 transaction sold for $2,373,000 at a 6.47% cap rate for a NNN lease with a 15 year term and 5 x 10 renewal options.
Acquisition Opportunities
Cypress, TX
  • Coming to Market Soon!
  • $3,285,000 or a 5.5%
  • Corporate guaranteed NNN lease
  • 10+ years remaining
  • Contact us for details
Pensacola, FL
  • $1,961,500 or 5.85% cap
  • 15-year absolute NNN lease with 14+ years remaining on initial term
Montgomery, AL
  • Back Up Contract Available!
  • $1,489,000 or 6.35% cap
  • 13 years remaining on 15 year NNN lease
Starks, LA
  • Back Up Contract Available!
  • NN lease thru 5/23 - performs at a 9.1% cap with percentage rent
  • Cash cow at $490K
Properties Wanted
Net Lease Properties $1.5 - $4M in larger metros only
10+ years or more
NNN only
Valuation Services

Would you like to see what your property would bring in today's market? CLICK HERE

The market is in short supply of quality net lease properties. You will never get more for your property than today. Don’t wait. Let us give you a no-obligation Broker Opinion of Value.
Listen to the Net Lease Experts on the CRE Show
Nancy Miller, President of National Net Lease Investments with Bull Realty and Fred Weir, President at Meadow Brook Restaurant Co. joined Michael in Studio One to examine trends in single tenant net lease properties including market and cap rate trends. Watch Now
Bull Realty | 404-876-1640 | NMiller@BullRealty.com | www.BullRealty.com