Kidder Mathews Launches OC Net Lease Group

Kidder Mathews has hired Michael Walseth as EVP to establish a net lease investment team in Orange County. The Walseth Net Leased Investments Team will be a specialty practice group under the Kidder Mathews label. The group will focus on single-tenant net leased transactions nationwide. While there has been a lot of disruption in the net lease space this year due to the coronavirus pandemic, Walseth says that there continues to be activity.

“The net lease space has remained very robust this year. 2020 will mark the most successful year for my team, and we have a lot of investors in the marketplace, and we closed some very large deals this year,” Walseth tells GlobeSt.com. “As we see it, the market remains very robust, even despite these challenges from the pandemic.”

Of course, demand has been most robust for properties occupies by essential uses. “Businesses that have been deemed an essential service, like pharmacies and grocery stores, have been the least hit,” says Walseth. “On the other end of the spectrum, the businesses that have been the most hit are gyms and other services sectors. There is definitely a dichotomy. My business has been focused on pharmacies, hardware stores and other brands that have been deemed essential.”

However, demand has slowed dramatically for properties with non-essential retailers. “There is definitely a decrease among investors for properties that have a higher amount of shop space or soft goods tenants,” says Walseth. “A lot of those properties haven’t been paying rent or are struggling to pay rent, but really what is driving the lackluster demand for that product is the financing. It is very tough to find lenders that will lend on non-credit-anchored shopping centers.”

While there is a dichotomy in the net lease market, Walseth is still seeing record cap rates on recent transactions. “This year, we are still seeing record pricing for assets that we are selling,” he says. “I closed a Home Depot in March in Brea for $45 million, and it is the largest single-tenant property to sell this year in Orange County. We set a national cap rate record with that deal. I also closed a McDonalds during the pandemic at a record low cap rate, and I closed a Walgreens in Phoenix at a sub-5% cap rate. We are definitely continuing to see compressed cap rates for the deals that are trading. Investors are a little bit more discerning in terms of looking at higher credit deals because the capital for those deals is more plentiful.”

Moving forward, Walseth is proceeding with caution, but is also focused on growth. “My goals are to take a measured approach right now. I am interested in working with the top talent in the industry,” he says. “We organize our businesses by brand, and I have associates that specialize in pharmacies, quick service restaurants and bank product. As we move into the months and years ahead, I will continue to expand into those specializations and those categories.”