SACRAMENTO-“California buyers have access to unmatched amounts of capital and due to tax constraints instate, are the most vibrant players in the national net lease market. Therefore, one could deduce that according to this theory, behind most net lease buildings sits a California owner.” So says a recent report from Calkain Cos., authored by managing director Patrick Nutt.
In the report, Nutt points out that “This is a complete fallacy where the data clearly shows that by far the largest contingency of owners comes from instate investors and that California/West Coast buyers are only a small fraction.
To test this thesis, a sample was taken of all Walgreens and CVS properties in the state of Florida. “Both tenants are considered prime net lease investments—the typical target of the “California Buyer” pitch that is made so frequently,” Nutt says. “The state of Florida is a large market with many attractive, high-income areas coupled with very favorable state tax laws which typically equates to an ideal location for any buyer to invest. Therefore, if the “California money” pitch were valid we would see a dominant percentage of California buyers for Florida pharmacies, one of the prime net leased investments available today.
The firm's data showed that ownership in single-tenant net-lease properties is procured primarily by local buyers. In this case, he says, “Florida, is a drastic difference to the rumors being conveyed to sellers by real estate brokers on a national level. Well over half (53.81%) of private market investors live close to their investments and it's an absolute fallacy to think that just because someone says they are able to secure California buyers would mean that they are the ultimate purchaser for any one asset.”
In fact, statically, he adds, “the California buyer” is almost 10 times less likely to purchase an asset within the outlined parameters than a local buyer.
To read more of how the data breaks down, which shows that the facts do not support the theory and is, in fact, fundamentally wrong, according to Nutt, check out the full report.
Editorial Note: This is one view from one company from one report. If you believe this argument is unfounded, i want to hear why. If you have a counter argument, by all means, please use the comment section below. We want to hear it. Let's start the debate!
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
