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Why Exchanging into NNN Is Looking Better than Ever

NEW YORK CITY—In the last year, I have noticed that many long-term New York City owners have begun selling and exchanging into triple net leased properties nationwide. For many of them, it is a diversification play when the majority, or all of their holdings are here.

By James Nelson | Updated on September 08, 2015

NEW YORK CITY—In the last year, I have noticed that many long-term New York City owners have begun selling and exchanging into triple net leased properties nationwide. For many of them, it is a diversification play when the majority, or all of their holdings are here. For others, they realize that they can secure a much higher yield, especially when favorable long-term debt is secured.

The returns outside the City are looking much better as Manhattan cap rates have dropped to all-time lows of 3.4 percent for walk up apartment buildings. Meanwhile, retail which offers the highest return out of the asset classes, is only marginally better at 4.1 percent.  At these cap rates, a buyer may still be able to get some positive leverage with a five year loan, but a long-term investor looking for a ten year fixed product would not receive the same benefit.

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