Net Lease Retail Cap Rates Hit Five Year Low

Cap rates for the single tenant net leased market continued to remain near historic lows in in the fourth quarter of 2012. Most notably, cap rates for net leased retail properties declined by 25 basis points and are experiencing a premium in excess of 75 basis points over both office and industrial net lease properties.

Supply issues remain to be at the forefront of the net lease market as new construction is limited and there is a lack of existing supply of long-term net leased properties. In the fourth quarter there was a 12.5% decline in supply of retail net lease assets. One of the primary factors contributing to the lack of supply and new construction is that tenants are able to achieve low rents by backfilling second generation retail space. Furthermore, the current interest rate environment has enabled property owners to refinance and hold properties at historically low rates rather than sell.

The limited supply has caused the median asking versus closed cap rate spread for net leased retail properties to decline an additional seven basis points in comparison to last quarter. Properties located in top tier metropolitan areas remain in the highest demand and are experiencing the greatest cap rate compression. Some of the most notable cap rate compression was for properties occupied by 7-Eleven, McDonald’s and AutoZone which experienced 20, 25 and 25 basis point declines respectively in the fourth quarter due to the tenants’ investment grade rating and quality long-term lease structures.

The national retail net lease market should remain active in 2013 due to the stability and financing availability of this asset class. Core assets with investment grade tenants will remain in the highest demand, maintaining low cap rates for these assets. Cap rates will remain near current levels in 2013 as buyer demand remains high and new development remains limited.

The Boulder Group is a boutique investment real estate service firm specializing in single tenant net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of over $1.4 billion of single tenant net lease real estate transactions through several real estate cycles. The firm was ranked in the Top 10 companies in the nation for single tenant retail transactions in 2012 by Real Capital Analytics. The Boulder Group is headquartered in suburban Chicago.

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The Boulder Group Arranges the Sale of a Triple Net Leased Culver’s Property in the Chicago MSA

The Boulder Group, a net leased investment brokerage firm specializing in single tenant assets, has completed the sale of a triple net leased Culver’s property located at 501 Pingree Road, Crystal Lake, Illinois for $1,990,000.

The 4,453 square foot Culver’s was built in 2003 and is located in Crystal Lake, Illinois. The property is positioned in a retail trade area just north of Northwest Highway, a primary traffic thoroughfare in the area. Nearby retailers include Target, Home Depot, Kohl’s, hhgregg, Dominick’s and Menards. The property is located in an affluent area of the Chicago MSA with average household incomes in excess of $109,000 within five miles of the property. The building is leased to a Culver’s franchisee entity on a triple net lease basis. There are approximately five years of lease term remaining with 3% annual rental escalations. Culver’s is a privately owned fast food chain with over 450 locations in 19 states, and the tenant is a sole franchisee operator.

Randy Blankstein and Jimmy Goodman of The Boulder Group represented the seller in the transaction; a private partnership based in Milwaukee.  The buyer was an Illinois based high net worth individual.

“The market for net leased properties in Chicago and other major markets remains robust as these assets are in high demand among private investors.” said Randy Blankstein, President of The Boulder Group.  Jimmy Goodman, Partner of The Boulder Group, added, “As there is a limited amount of core assets in the market, some net lease investors are seeking higher yielding assets like quick service restaurants in primary markets.”

About The Boulder Group

The Boulder Group is a boutique investment real estate service firm specializing in net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of more than $1.4 billion of net lease real estate transactions through several real estate cycles. The firm was ranked in the Top 10 companies in the nation for single tenant retail transactions in 2012 by Real Capital Analytics. The Boulder Group is headquartered in suburban Chicago. The company’s website address is www.bouldergroup.com

The Boulder Group Arranges the Sale of a Single Tenant CVS Property in Bogalusa, Louisiana

The Boulder Group, a net leased investment brokerage firm specializing in single tenant assets, has completed the sale of a net leased CVS property located at 329 Superior Avenue, Bogalusa, Louisiana for $4,800,000.

The 11,945 square foot CVS was built in 2007 and is located on 1.27 acres. The building is situated on a hard corner of a signalized intersection along a primary thoroughfare in the area. The property is located in the primary retail trade area anchored by Wal-Mart and Winn Dixie. The lease features rental escalations in the renewal option periods. The building is leased to CVS on a net lease basis with approximately 20 years of lease term remaining. CVS is an investment grade rated company with a Standard & Poor’s rating of BBB+ and has over 7,300 stores nationwide.

Randy Blankstein and Jimmy Goodman of The Boulder Group represented the buyer in the transaction; a high net worth investor based in the Midwest.  The seller was an Arizona based investment company.

CVS has approximately twenty years of lease term remaining on an original twenty-five year lease with rental escalations in each of the renewal option periods. CVS is a publicly traded company on the New York Stock Exchange (CVS), with a market capitalization of $61 billion. CVS is an investment grade rated company with a Standard & Poor’s rating of BBB+ and has over 7,300 stores nationwide.

“The market for net leased CVS properties with over 20 years of lease term remaining remains robust as these assets are in high demand among private investors.” said Randy Blankstein, President of The Boulder Group.  Jimmy Goodman, Partner of The Boulder Group, added, “Cap rates remain at historically low levels for single tenant pharmacy assets leased to Walgreens and CVS for twenty or more years.”

About The Boulder Group

The Boulder Group is a boutique investment real estate service firm specializing in net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of more than $1.4 billion of net lease real estate transactions through several real estate cycles. The Boulder Group is headquartered in suburban Chicago. The company’s website address is www.bouldergroup.com

Single Tenant Net Leased JP Morgan Office Property in Columbus, Ohio Sale Arranged by The Boulder Group

The Boulder Group, a net leased investment brokerage firm specializing in single tenant assets, has completed the sale of a net leased JP Morgan Chase office property located at 3401 Morse Crossing Road, Columbus, Ohio for $8,928,000.

The 84,000 square foot JP Morgan Chase property was built in 1994 and renovated in 2004. The building is located just west of Interstate 270 and less than three miles north of the Columbus airport. The building is part of a 580,000 square foot JP Morgan Chase regional campus. The property is located near the Easton Town Center, a 1.7 million square foot lifestyle center which features retailers Nordstrom, Macy’s and AMC Theaters. The building is fully leased to JP Morgan Chase on a net lease basis with approximately two years of lease term remaining. JP Morgan Chase is an investment grade rated company with a Standard & Poor’s rating of A+ and has over 5,500 locations nationwide.

Randy Blankstein and Jimmy Goodman of The Boulder Group represented the seller in the transaction; a private Chicago based partnership. The buyer was an East Coast based institution.

JP Morgan Chase has approximately two years of lease term remaining. JP Morgan Chase is a publicly traded company on the New York Stock Exchange (JPM), with a market capitalization of $151 billion. JP Morgan Chase is an investment grade rated company with a Standard & Poor’s rating of A+ and has over 5,500 locations nationwide.

“The market for single tenant office buildings leased to investment grade rated tenants remains robust as these assets are in high demand among investors.” said Randy Blankstein, President of The Boulder Group.  Jimmy Goodman, Partner of The Boulder Group, added, “Despite the shorter lease term of this asset, the transaction was fulfilled due to the credit quality of the tenant and its prime location in a major market.”

About The Boulder Group

The Boulder Group is a boutique investment real estate service firm specializing in net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of more than $1.4 billion of net lease real estate transactions through several real estate cycles. The Boulder Group is headquartered in suburban Chicago. The company’s website address is www.bouldergroup.com

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The Boulder Group Arranges the Sale of a Net Leased Walgreens Property in El Reno, OK (Oklahoma City MSA)

The Boulder Group, a net leased investment brokerage firm, has completed the sale of a single tenant net leased Walgreens property located at 1550 SW 27^th Street in El Reno, OK for $4,887,000.

Walgreens is the sole occupant of the 13,650 square foot retail building that was developed in 2009. The property is located on a 1.6 acre parcel in the primary retail trade area of El Reno, OK. Walgreens is located directly across from a Wal-Mart Supercenter. The property is less than one-quarter mile from a full interchange with Interstate 40 where traffic volumes are in excess of 26,000 vehicles per day. The property is fully leased to Walgreens with twenty-two years of lease term remaining.

Randy Blankstein and Jimmy Goodman of The Boulder Group represented the seller, an Oklahoma based developer, in the transaction. The buyer was a high net worth individual based in South Dakota.

Walgreens has twenty-two years of lease term remaining on an original 25 year lease. Walgreens is a publicly traded company on the New York Stock Exchange (WAG), with a market capitalization of $27 Billion. Walgreens is an investment grade rated company with a Standard & Poor’s rating of A.

“The net leased Walgreens market remains active as investors are attracted to investment grade rated companies with over 20 years of lease term remaining” said Randy Blankstein, President of The Boulder Group.  Jimmy Goodman, Partner of The Boulder Group, added, “Private buyers are continually paying premiums for long term leased Walgreens properties due to the stable income stream the properties offer as an alternative investment.” 

About The Boulder Group

The Boulder Group is a boutique investment real estate service firm specializing in net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds. Founded in 1997, the firm has arranged the acquisition and disposition of more than $1.4 billion of net lease real estate transactions through several real estate cycles. The Boulder Group is headquartered in suburban Chicago. The company’s website address is www.bouldergroup.com