Net Lease Stays Hot As Owners Look To Leverage

Dallas, TX (November 17, 2017) –Max Freedman, head of the Sands Investment Group Austin and Restaurant Group, outlined some of the trends discussed at the ICSC conference and what’s ahead for the industry in this EXCLUSIVE.

DALLAS—The ICSC Texas Conference and Deal Making event was a three-day regional event with information about current industry issues and a way to connect with regional contacts for deal making. After the event last week, Max Freedman, head of the Sands Investment Group Austin office and restaurant group, discussed some of the trends that came out of the conference and what’s ahead for the industry in the coming year, in this exclusive. What trends emerged from conversations at Dallas ICSC?

Freedman: Net lease remains hot and owners are looking for ways to leverage this investment opportunity. For example, many shopping center owners are breaking up their larger centers in order to monetize the value of their net lease assets. That’s why we see more investment sales brokers going after net-lease product, versus in year’s past with the monster power center deals and larger price point transactions. Can you elaborate about the break-up strategy?

Freedman: The delta between where a single-tenant net-lease credit tenant pad trades versus selling a $20-plus million power center by itself can be as significant as 150 to 200 basis points. While we hear doom and gloom in the marketplace regarding big-box retail, the freestanding pads that are outside of these centers can still drive the value of these centers.

It’s definitely a strategy for owners to use the pads as a way to unlock their equity or pay down their debt in their own shopping centers. The strip space and anchor left over become the gravy in the deal. There are more buyers in the market for assets that are priced at $5 million or less for hands-off management-style investment. The more you can create this product type or something that fits in that box, the higher the price point or the lower the yield on the exit. The name of the game is creating the product that meets the 1031 market’s largest buyer pool. How does that impact the buyer strategy?

Freedman: More people are looking for the hands-off investment opportunity. These buyers are not involved in real estate on a day-to-day basis but are seeking a wealth creation options with an underlying asset unlike stocks and bonds. The education curve over the last 3 to 5 years has broadened the buyer pool for both broker and buyers in this product type. What do you see in the Texas net-lease restaurant market?

Freedman: We’re going through a change. Many tenants are developing or owning the real estate themselves, in turn, making it a much more competitive for developers who want to build this product type. Pad sites and entitled land sales are stronger than ever versus the traditional build-to-suit option. For us, that means we are spending our time with tenants to help them monetize their real estate portfolio and execute their expansion plans.

Max Freedman


See Article in Globe St.


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