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Single Tenant Real Estate – an Attractive Alternative Investment

By Sunny Sajnani (Metropolitan Capital Advisors)
 
Single tenant triple net (NNN) leased property is a form of investment that offers higher yields and stability in a time of financial market volatility. With money to burn but still having a strong aversion to risk, NNN leased property is becoming a very popular alternative investment at a time when interest rates are at historic lows.
 
NNN leased property is attractive to passive investors as this asset type requires the tenant to assume all risks—such as higher property taxes, insurance premium increases, and structural damage. The only risk the investor incurs is whether the tenant can stay in business or not!
 
The Corporate Finance & Net Lease division of Jones Lang LaSalle said “The low interest rate environment and the lack of safe-haven investment alternatives are driving new sources in build-to-suit and sale-leaseback activity, and investors have incredibly healthy appetites for stable and dependable income streams that single-tenant assets provide.”
 
For the last quarter of 2010 and first three quarters of 2011, CoStar Group shows that sales of single tenant properties have averaged more than 10,000 transactions per quarter—the highest quarterly totals on record. And for fourth quarter comparable sales, CoStar is showing that pace is continuing.
 
The availability of inexpensive money from a variety of capital sources, both large and small, has fueled the more than $29 billion of confirmed single-tenant investment sales year to date. A majority of the investment in single-tenant real estate has been with tenants that are considered investment grade (S&P rated BBB- or better).
 
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