Apartment Lease Buyout

By BethMattsonTeig

Investors are pursuing net-lease properties are upping the ante. Instead of paying 10 million dollars for a single property, they fork over $ 100 million for a portfolio. Buyers are increasingly drawn to the portfolio of deals because they offer a way to place a large enough amount of money quickly in a highly competitive arena of investment.

Portfolio sale-leaseback has reached record levels last year with major deals from retailers such as CVS and Shopko announces staggering numbers. In December, CVS Corp. announced it had launched a sale-leaseback of 340 owned or leased buildings to the ground by the pharmacy in 29 states $ 1.3 billion. Shopko reached an agreement to transfer lease on 112 properties and 66 properties Pamid Shopko 815 million. The companies are from the capital to finance campaigns of all aggressive expansion of LBO.

These two cases represent the upper end of the spectrum, but investors showed appetites portfolios multi-tenant building that is often unique long-term, triple net leases.

"A few years ago, a large amount was a non-starter," said Brian Scott, senior managing director of the group and leaseback to CB Richard Ellis in New York. "But these days, the larger is not really an obstacle because of all the capital looking for investments, "said Scott.

One might think that higher prices would reduce the field of potential bidders. Yet it seems that the opposite is true. In fact, property portfolio is a niche in an increasingly crowded and competitive.

Portfolio sale-leaseback for a tenant credit quality and solid real estate can receive upwards of 30-40 calls for tenders. Even portfolios of properties of lesser quality and not investment grade tenants receive five to 10 offers.

Despite some of the sales of high-profile, what is surprising is that many of these portfolio transactions are done outside the radar screen. "There are so many fund net lease there they are in direct contact with companies, to ad sales are not even hitting the streets," said Jonathan Hipp, president and CEO of Kos Calkain Inc, a brokerage firm in Reston, Va. For example, Hipp recently completed the sale and lease of six Advance Auto Parts stores in the Northeast for 15 million dollars. Despite the fact that it was a case where the off-market bids were solicited, the operation has attracted seven bidders.

Another reason investors are attracted by the large portfolios is encouraging diversification of geographical risk. "Most of our transactions are acquisitions of portfolios, with two or more properties," said Ben Harris, managing director and chief investment internal WP Carey (NYSE: WPC), an investment company based New York.

The company plans to acquire $ 1 billion in commercial real estate in 2007. For example, WP Carey has recently purchased three cold rooms at the Atlanta LLC northern cold storage for an undisclosed price.

The two portfolios and single-building sale and leaseback are popular among investors, because the properties are known to generate stable returns with minimal hands on management responsibilities because of the long-term lease triple structure net. Often, pricing is based as much on the credit quality of the tenant that the quality of real estate.

Net leases are often described as income to purchase bonds in the form of real estate. "This is certainly a source of predictable income, bonds, as in the structure of a number of different perspectives," said Hipp. Even if the returns are highly variable, typically better trade deals around 200 basis points over the 10 year Treasury.

Booming sales of portfolio

The industry data and anecdotal sources agree that deals are holding up. .