NORTHBROOK, IL-While investor interest in core net lease assets has returned in full force, investor demand for opportunistic net lease assets is just now beginning to return, according to Randy Blankstein, president of The Boulder Group.
“People expected the opportunistic market to take off this year, and we’re seeing that in a limited way,” Blankstein tells GlobeSt.com. “They’ve branched out to assets with shorter-term leases, which are higher-yielding, less conservative investments. But the shorter-term leases only apply to the top 20 metro areas and the deals still have to be corporate credits.”
Historically, opportunistic net lease deals differentiated themselves from core deals in three ways – they had shorter-term leases, they were located in secondary markets and they were guaranteed by private or franchise credit.
“For investors who are seeking yield, short-term leases are the theme for this year,” Blankstein says. “I don’t expect to see activity in secondary markets and private or franchise credits in 2011. I think that’s a good story for 2012.”
Blankstein points out that activity continues to be limited in second tier markets, while lenders are still relatively uninterested in providing financing for assets net leased by private or franchise credit tenants. He estimates the yield spread between core net lease deals (20-year leases) and opportunistic deals (5-year leases and under) is at least 200 basis points.
Recently, The Boulder Group brokered a Wendy’s restaurant in suburban Chicago that represents this trend, Blankstein says. An Illinois-based investor acquired a single-tenant, net leased Wendy’s property located in Midlothian, IL for $685,000.
The 3,000-square-foot building sits on a 35,619-square-foot parcel and is 100% leased for four-years to Wendy’s International Inc. It traded at a cap rate above 9%, Blankstein says.
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