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Net Lease Trend Gains Ground in Receding Economy

NEW YORK CITY-The "flight-to-quality" mindset that sent Wall Streeters scurrying from dot-coms back to blue chips has brought net lease deals into favor among building owners. Increasingly, buyers are opting for the security that a long-term, low-maintenance net lease deal can offer.

By Glen Thompson | Updated on August 09, 2001

NEW YORK CITY-Net leases are gaining most-favored-deal status among building owners eager to minimize their risks in a volatile economy. Many a multifamily or multi-tenant office property has been sold over the past two years in order to finance a net lease acquisition that puts the fees, and most of the headaches associated with ownership, firmly in the tenant’s hands.

According to Andrew Oliver, a managing director at real estate investment banking firm Sonnenblick-Goldman Co. who specializes in arranging financing and sales for single-tenant net lease properties, the uptick in net lease deals is being driven by a combination of buyer insecurity, favorable interest rates and the plug-and-play convenience of owning a building in which the tenant has to fix the plumbing and pay the taxes.

“There’s a flight to quality in a market like the one we have today,” Oliver tells GlobeSt.com. “People are looking toward highly rated tenants. Lenders feel more comfortable when lending against a high credit-rated tenant. There’s little rollover risk, no worry about capital improvements, and you know you have cash flow for 15 years.”

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