NEW YORK CITY—As REITs go—when it comes to the net lease sector—they come in all shapes and sizes. Several of those will be showcased Wed., April 11th, at RealShare Net Lease, and executives with some organizations taking part in the event spoke EXCLUSIVELY to GlobeSt.com about how they work and the state of the market.
“We're a private REIT that started in 2007 as a vehicle for our family to invest in but we loved the structure,” says Amy Tait, chairman & CEO, Broadstone Real Estate. “Our goal was to get 100 shareholders in order to qualify as a REIT and we now have about 1600 investors, with about $1 billion of equity collectively.”
She continues, “Our average investment is well over $500,000 and we've grown without big institutional investors or retail investors and we don't use broker/dealers. It's all been people coming to us directly.
“We're raising about $20 million of equity a month, and UPREIT transactions are accelerating. We have a 6.6% dividend yield and compound returns of 12%. We're 100% leased and our average remaining term is 14 years. Our contractual rent growth in leases is an average of over 2% annually.”
On the public side, perception has been off, notes Gordon DuGan, CEO, chairman, Gramercy Property Trust, Gramercy Europe.
“The well-run net lease REITs are defensive in nature and should be rewarded by the market, but some have been rewarded more than others and the reward isn't fair,” he declares. “It's understandable that Realty Income and National Retail Properties have been rewarded because of their great operating histories and long track records. But that doesn't mean they're factually or structurally more defensive than other public REITs.”
He continues, “At Gramercy, we're operating with very low leverage—similar to National Realty—with good tenants similar or lower to top performers, we have a low lease rollover and a lot of the defensive characteristics they do but I don't think we've been getting credit.
On the left of the balance sheet, we have good credit, good diversification, high quality assets and we don't develop spec buildings. On the right, we have tons of flexibility, critical mass of assets following the merger with Chambers Street and low leverage.
Meanwhile, the aforementioned National Retail is sticking with what it knows best: single-tenant, small box retail such as restaurants, convenience stores and auto service sites.
“We continue to focus on retail because our renewal and retention rates with high quality tenants remains at 80 to 90% and the market continues to be very good,” explains Craig Macnab, chairman & CEO. “Retailers are performing well, there is little new construction and our portfolio continues to be 99% occupied. One of the virtues of focusing on the sectors we do is that there's essentially zero competition from ecommerce. People in West Texas are not going to get gas on the Internet.”
He continues, “We have 2,250 retail locations and deal flow continues to be very strong. Pricing looks like it's stabilized and there's continued demand for high quality locations. Cap rates look like they've stabilized; they're around 6.5% for high quality retail locations. We bought 220 properties last year and we're off to a good start in 2016.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
