LOS ANGELES—“It is a good time to be a seller,” Gino Sabatini, managing director at W. P. Carey, says about the state of the net lease market. Sabatini says that low cap rates and low interest rates, which are helping to drive demand, are creating a perfect storm for the net lease market. He is speaking next week on the Town Hall Power Panel: The State of the Net Lease Market at Net Lease West in Downtown Los Angeles, and will discuss the market dynamics with panel moderator Jeff Hughes, managing director at Stan Johnson; Harold Hofer, CEO at Rich Uncles; Gordon Whiting, managing director at Angelo, Gordon & Co.
Sabatini expects the market to remain attractive for sellers through 2017. “As long as rates remain low and the alternative for those seeking income is not available, it will remain a seller's market,” he tells GlobeSt.com. “There are all sorts of demographic groups that are looking for a stream of income, and we see a demand for that.”
This vibrant seller's market is fueled by a fervent demand for net lease product due to the low interest rate environment. A lot of people, especially those that are retired, are turning away from the zero-percent interest rates in bank savings accounts and putting their money into hard assets. Net lease is the perfect fit for this demographic because it is low maintenance and has a predictable cash flow.
This strong seller's market doesn't mean that W. P. Carey is disposing or looking to dispose of its assets. Sabatini says they look at everything on a case-by-case basis and always do what is best for the asset and market timing. “We have a regular program of capital recycling and we are always looking to optimize the assets in our portfolio,” he adds. “We are opportunistic, and if we think that the market is pricing an asset class a little more richly than we think it should be priced, then we will be sellers in that situation.”
While many people are talking about the upcoming election, and how it might affect the market, Sabatini is more worried about interest rates, which he thinks will have a greater affect. “I think the most topical issue will be the election. I am sure that a lot of people are wondering how it will impact the market,” he says. “My assumption is that it won't make much of a difference who wins in terms of the net lease market. [The state of the market] is really more of a function of where interest rates go. If rates remain low, there will continue to be a strong demand for net lease properties.”
Sabatini, however, isn't much of a forecaster, and he says that the company doesn't make decisions based on estimations about the future. “We really don't have metrics that we set and that we base decisions on,” he says. “We really don't attempt to do any metric forecasting, but instead, we look at where we are at any given point in time. We don't really do a ton of predictions.”
Listen to Sabatini and the other panelists expand on this topic November 2 in Downtown Los Angeles at Net Lease West.
Hear from the net lease sector's top leaders as they explore current and emerging trends and provide their outlook for continued success in this space. Join us at RealShare Net Lease West on Nov. 1 and 2, where you'll meet the top owners, investors, brokers and financiers in the net lease and sale-leaseback community. Learn more.
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