Carlyle Waits for a Large Net Lease Portfolio to Come to Market

Carlyle doesn’t deal with small transactions. Last year its net lease business did about $100 million in deals, which Managing Director Barclay Jones called modest. “It was one acquisition and one sale,” he tells GlobeSt.com.

Carlyle’s net lease activities, of course, were disrupted by the market dislocation of the last year like everyone else. Much of its efforts were spent tending its own portfolio.  When the Global Credit platform acquired iStar’s net lease business in 2022 for $3 billion, it gained a diversified portfolio of triple-net leases spanning industrial, office and entertainment properties across 18.3 million square feet in the US. Jones led iStar’s net lease strategy for more than 20 years before joining Carlyle with the acquisition.

This year might be different, says Jones, who is one of the participants in GlobeSt.com’s Net Lease conference being held in roughly two weeks. It’ll still participate in bids, but conditions are ripening for actual transactions to take place. “We are now beginning to see some interesting developments. Last year it was tough to see how you got someone to pay enough rent that would result in a risk-adjusted positive spread” for an investor.

The debt markets remain treacherous, he adds, but here too movement is taking place. “We are seeing CMBS and other lenders come back into the market. With the failures of two regional banks last year, that put a damper on a lot of our core lenders’ interest in making real estate loans.”

The net lease business also provides internal support to the other business lines in the credit suite, which covers a wide berth. There is an opportunistic business and a CDO/CLO apparatus, which is one of the largest issuers in the world, as well as a whole insurance operation. Net lease remained busy assisting the insurance operation with Carlyle Real Estate credit. “We have done two apartment communities [with Carlyle Real Estate Credit] already this year and we are going to hopefully get some sale lease transactions done.”

But most of all Jones will be looking for a suitable large portfolio deal this year. So far this year he hasn’t seen anything, which is not too surprising as many investors are waiting for the Fed to cut interest rates.

“We typically like to make between three to five portfolio transactions a year, which will still be a challenge in 2024. But we will see.”

Net Lease Spring:

Held April 16-17 in NYC, Net Lease Spring will bring together hundreds of dealmakers from the nation’s top firms. This year’s program will feature 5.5 hours of face-to-face networking and over 5 hours of content focused on micro and macro trends for 2024, being resilient through market volatility, how to serve your corporate tenant clients and much more! Learn more or register here.