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In-Place Debt Crucial For Sales

From a seller's perspective, the best cap rates are being achieved on properties with assumable, in-place financing

By Michelle Napoli | Updated on August 14, 2009

NEW YORK CITY—In-place assumable financing continues to be crucial to getting closed many of the property sale transactions that are getting done in this market environment. For the net lease market in particular, that has resulted in a tale of two markets, notes CapLease Inc. chairman and chief executive officer Paul McDowell: properties with attractive and assumable financing and those without.

“There is a wide and still growing price differential between the two,” McDowell said during the New York City-based REIT’s recent second quarter earnings call. He likewise said that cap rates have not risen nearly as much for net lease properties with in-place financing and high-quality tenants as they have for other assets.

Lexington Realty Trust, another New York City-based REIT focused on the single-tenant market, sold six properties for a combined $75.4 million and at a weighted average cap rate of 8% during the second quarter. President and CEP Will Eglin noted during LXP’s recent Q2 earnings call that while the market for sales is “very challenging,” having in-place assumable financing is “key.”

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