NNN – Commercial Real Estate News

Drug Store Sector Update

April 16, 2019

Contributing Author: Sean O’Shea

Certainly for the last decade or longer, the drugstore sector has been viewed by many single tenant investors, as a bond-like investment, in the sense that they had investment grade ratings (this has changed over the last decade, in part, due to the additional debt that has been incurred for various mergers in the sector); and predictable, stable income streams that were afforded due to absolute NNN lease structure of most drugstore tenants’ leases.

There has been some concern, over the years, regarding whether these assets afford an inflation hedge, since in the case of Walgreens-Boot Alliance, that the rental income was stabilized or ‘flat’ for almost 75 years. The CVS Health and Rite Aid lease structure can vary; but do afford some scheduled increases.

Time To Lock In Returns

February 20, 2019

Contributing Author: Sean O’Shea

There has been a lot of discussion, recently, in broader investment circles, that we have come through ten years since the “Great Recession of 2008-2009,” and that some scale of a Recession is on the horizon, whether Q4 2019 or mid 2020, which suggests, a round of “defensive investing” may be in order.

Having come through this period of historically compressed cap rates (higher prices) across all asset classes, none has been more pronounced than the NNN retail sector of the real estate investment industry.

Immediately after the Great Recession, when debt sources were becoming more diverse, both debt and equity were available, in abundance, in the multi-family or recycled housing sector, since you had a new captive audience of former home owners (newly created renters) who, in some markets, actually rented their own prior homes from their new hedge fund landlords, who had swooped in and bought up bank REO assets en masse in certain markets like Phoenix.

2019 NNN Forecast

January 09, 2019

Contributing Author: Sean O’Shea

As many much smarter ‘guys’ than me (and smarter women, too) are reviewing the last year; and struggling with Forecasts for 2019, at this time, there has been a lot of discussion about Fed Policy on rates and their impact.

Bloomberg had a recent interview with the legendary hedge fund and financial advisor, Stanley Druckenmiller, who was reviewing the last ten year era; and he was critical, then, (2009); and now, (2019) regarding rates and the liquidity implications of the unwinding of QE policies.

We think some useful language, is to characterize ‘asset bubbles’ or the asset inflation that these policies may have created as a real thing. Actually, many are referring to this period as the ‘Bernanke-Yellen Asset Inflation’ period.

End of Year 2018 Wrap up for CRE

December 13, 2018

2003-2005 “Irrational exuberance” a la Greenspan, now famous quote;

2008-2010 Great Recession and aftermath: PTSD for many of us;

2016-2018 Recovery being fully realized after almost a decade;

2019-2020 And Beyond: A measure of Uncertainty???????

With the marking of George H.W. Bush’s passing, we are afforded, yet, another “Opportunity to take stock.”

For those readers and investors who were beneficiaries, in this past year of the Tax and Jobs Act of 2018, I suspect, we can readily acknowledge the positive impacts of stock market valuations, due, in part, to share buy backs; and, shortly, when we do our taxes at new rate structures. The Economy has continued… (Is it sustainable?). The introduction of Opportunity Zone Funds, as once-in-a lifetime tax incentives, if properly executed, are also very encouraging.

How do NNN assets address your concerns?

October 24, 2018

Contributing Author: Sean O’Shea

Black Swans…Fed rate raise…Recession Fears…4% GDP Hopes…Impact of Federal Deficits…Credible realty…

We often state, in an initial conversation with a prospective Client, while these Net leased assets (NNN) are now viewed as a convenient solution, which limits the management and operations responsibility for a Landlord/Investor, “Not all net NNN leased properties are the same.”

In the last ten years, these NNN assets have become ‘commoditized’. Many seasoned investors, particularly 1031 Exchange Buyers, who have a tight 45 day timeline in which to make a multi-million dollar decision to defer their substantial capital gain and secure a safe, predictable income stream imagine that you go to a Commercial Real Estate Listing Platform, like Crexi, Brevitas, Loopnet, or Leavitt Digital (LDCRE) to identify and secure their trade replacement solutions. There has, also, been a proliferation of nominal “Investment Sales Broker”, as well. Continue reading How do NNN assets address your concerns?

How do NNN assets play a role, as a bond-equivalent investment, in an uncertain environment, like 2018-2019?

August 08, 2018

Contributing Author: Sean O’Shea

We are always told that ‘Asset allocation’ is critical to your Investment Portfolio. This is true for your real estate portfolio, too. NNN assets can play a role; but your selection criteria needs to be is more than, merely, debating cap rates, in our experience. We have stated in a number of prior Net Lease Blogs, “Not all Net Lease properties are the same”. This has never been more true.

The supply of these NNN properties has improved, significantly, since 2009-2010 Great Recession period; and we have a decade of low interest rates, the result of the Federal Reserve policies, with rates gradually moving upwards with rates increasing the margin of error due to very, very thin ‘spreads’. Cap rates going up; not down, as we have had the luxury of low rates in the last ten years. It covered a number of potential miscues…The Market is, now, changing; and extra care is required for best investor results. Continue reading How do NNN assets play a role, as a bond-equivalent investment, in an uncertain environment, like 2018-2019?

Time for a “NNN Up Periscope in Q2 2018” from the Great Recession of 2008-09…what is really going on Ten Years later?

July 10, 2018

Contributing Author: Sean O’Shea

Remember, as we have stated in a number of prior Net Lease Blogs, that “Not all Net Lease properties are the same”. Never more true.

We have just completed a series of IRC 1031 Exchange Transactions, which have provided us a new vantage point:

“Where we are 10 years later” in Q2, 2018?

“Where we may be going for balance of the year 2018-2019?”

Almost all knowledgeable observers and participants in the Net Lease Sector of the real estate industry would, now, admit, that we are in the late phase of this Real Estate Cycle after a whole Decade of Recovery. The subject matter in industry publications has changed recently. Subjects have shifted from NNN inventories, to issues of hedging inflation for the 1^sttime in 10 years, to raising interest rates (and presumably cap rates) moving northward. Some are even whispering about “A new Recession” in the predictable near term future is new subject matter. Continue reading Time for a “NNN Up Periscope in Q2 2018” from the Great Recession of 2008-09…what is really going on Ten Years later?

What is the real role of NNN Properties in the Real Estate Industry?

June 19, 2018

Contributing Author: Sean O’Shea

It’s kind of funny to be considered, nominally, as a ‘nationally-recognized net lease expert’ after all these years.

My first exposure to this asset class was back a few decades ago, when I was charged with developing a real estate portfolio for a mineral-asset based Family Office in Fort Worth whose patriarch and predecessors were legendary oil wildcatters who wanted diversification to their Bond Portfolio.

My own background had been as a junior partner in a regional development firm with appropriate higher risk returns; and as a Shareholder of a regional commercial brokerage, whose business model was based on acute data and cultivating relationships, as the foundations for our demonstrative success in tough East Coast markets. Continue reading What is the real role of NNN Properties in the Real Estate Industry?

Late Cycle Behavior of NNN Investors

May 24, 2018

Contributing Author: Sean O’Shea

Here we find ourselves almost nine and one-half years from the impact of the Great Recession of 2008-09. While the market conditions that led up to the public acknowledgement of the financial crisis, were years in the making, many observers could have foreseen the Storm Warnings. I remember having my NNN Advisory Team in tow at the annual ICSC Regional event in San Diego in the spring of 2008. As we wandered through the various vendors’ booths and exhibits, we passed the Lehman Brothers booth. Displayed were the usual swag items that populate these kinds of industry events. Sitting on a display table, I spied a pile of very well designed and finely detailed ‘Baseball-type caps’ with LEHMAN BROTHERS, emblazoned on the crown of the caps. I suggested to my Team, that they may wish to grab one of them, as a souvenir of a “Soon-to be Bygone Era,’”; since these guys at legendary Lehman are going down, based on the structure of interest only loans and other deals that we had tracked in the prior few go-go years. They all looked at me, as if, I was ‘nuts’; but, nonetheless, each grabbed their souvenir hats. Now, a keepsake of lending period that contributed, mightily, to the Financial Crisis as it unfolded. Continue reading Late Cycle Behavior of NNN Investors

NNN 1031 Case Studies

May 15, 2018

Contributing Author: Sean O’Shea

Most investors have experienced a run up in real estate values; and with a prospective sale of a real estate asset pending, in consultation with their accounting professionals, they begin to explore how to defer substantial capital gains in the most efficient manner. Utilizing and executing a successful IRC 1031 Exchange Provisions is the principal vehicle that was retained in the recent Tax Act.

The IRC 1031 Compliance timelines require an “Identification” of your trade replacement property within 45 days of their completed sale of the relinquished property; and, then, an additional 135 days to complete the purchase of the new property that tax deferral transaction. Easy…Right!

Well, not so fast.

The challenge, in part, is to define your client-specific investment objectives: Continue reading NNN 1031 Case Studies