National Single Tenant Insider
August 2017
Greetings!

You are receiving the National Single Tenant Insider as a result of your involvement in the net lease investment arena as an investor, developer or supporting professional to the commercial real estate industry. We welcome you to our newsletter and encourage your comments and questions. 
Nancy Miller, CCIM
President
Net Lease Investments
Bull Realty, Inc.
404-876-1640 x 118
NMiller@BullRealty.com
IN THIS ISSUE:

  • August Net Lease Survey Results
  • Part II - Strategies to Maximize Net Lease Returns
  • Industry Soundbites
  • Ask Nancy
  • Recent Sales
  • Acquisition Opportunities
  • Properties Wanted
Survey Results
The Bull Realty National Net Lease Investment Group just completed a survey of single tenant net lease (STNL) owners, developers and brokers. The survey was sent to over 4,000 individuals in early August. The objective was to gain a better understanding of investor preferences and their STNL goals in the next 12 months. The survey investigated the following areas:

  • The key factors investors consider when buying a STNL investment.
  • Investor perceptions of interest rate and cap rate trends over the next 12 months.
  • For those planning to buy STNL properties in the next 12 months, the most important reason for their decision to buy.
  • The MOST and LEAST favored types of tenants that STNL investors are seeking.
  • How investors “source” or find investment properties.

Get the results of this exciting survey here!
Part II - Strategies to Maximize Net Lease Returns
In our last issue of “National Single Tenant Insider”, we began a Two Part article giving net lease investors strategies to increase their returns. Part Two continues with 7 more strategies. The fundamental question we are attempting to answer is:

“What strategies can help single tenant net lease (STNL) investors improve yield without adding little or possibly no risk?”

1. Consider non-credit tenants in your portfolio. Non-credit tenants fall into the category of franchise operated locations with one or more locations, regional tenants, owner/operators with one or more locations. They can be thought to have less experience and less financial strength than a “credit” tenant which translates in the investor’s mind to be weaker lease “guarantors” and higher risks, but that may be a poor generalization. Don’t overlook consideration of this category of tenant to increase your yield by getting a great tenant and higher cap rate.

2. Watch out for states with no state income tax. We have seen investors who only want to purchase properties in states that have no state income tax. Caveat emptor, as they say, or “buyer beware.” A recent 15 year dollar store closed for a 5.8% cap rate in FL. That same property in a comparably located town in GA closed at a 6.35% cap. What one may save in taxes is more than made up by paying more for the property than in another state with a state income tax.

3. Consider cost segregation strategies. STNL investors can accelerate depreciation deductions to reduce tax deferrals and increase cash flow. Investors hire a firm to do a cost seg study to determine which costs in a property, down to the nuts and bolts, can be allocated on a 5 to 15 year period vs. the traditional 39 year depreciation life, delivering tens of thousands of dollars in tax saving, often within a 5 year period.

4. Avoid Ground Leases. Ground leases are marketed just like fee simple real estate. However, the investor is collecting the rent from the tenant on the use of the physical ground. Ground lease cap rates are generally significantly lower than fee simple leases - in the 4-5% cap rate range. They are basically like “CD’s on steroids” with limited upside growth and lower yield. At the end of the lease term, unless the tenant “walks” from the property, the investor in the ground lease has no further income stream or interest in the property.

5. Higher risk and higher upside with shorter term leases. With short term leases, investors ask: “What if the tenant does not renew?” Hence, they shy away from leases with shorter terms (1-5 years) remaining. OPPORTUNITY: Be that investor to seek out these shorter leases. If the current rents are below market, an investor knows that if the tenant does not renew, they can easily re-purpose and re-rent the property at higher market rate rents. Now that is a great opportunity to increase yield!

6. Diversify STNL portfolio risk. Like a brokerage account containing a portfolio of stocks and bonds, investors can blend high yield and lower yield STNL properties in their portfolio. This blending can also include a staggering of lease expirations and give an investor greater flexibility and control.

This is Part 2 of a 2-part series .   We hope that these strategies will provide you with more insight into ways to increase yield over the coming years in your STNL investments. Nancy Miller has gathered these strategies over her 15+ year career as a STNL broker and investor, working with a variety of buyers and seller. She is available to discuss any of these strategies and your specific requirements. Contact her at 404-876-1640, ext. 118 or email her to schedule a time to speak at NMiller@BullRealty.com .
Industry Soundbites
1031 Tips – Being Brilliant at the Basics 

It is baseball season and 1031 intermediary, Ron Raitz of ADE (Atlanta Deferred Exchange) shows us some valuable tips from the time we leave the dugout, to the batter’s box, running the bases, and getting home. Follow this link for good information in planning and executing your 1031 exchange.
 
Stay tuned for more information on potential IRS 1031 tax reform in a later issue.
Acquisition Opportunities
Lithonia, GA 
  • Corporate guaranteed NNN lease
  • Signalized intersection with 22K+ vehicles per day
  • Established and newly remodeled retail interior
  • Priced at $2,160,000 
Summerville, SC
  • New construction
  • $2,232,500/ 6.0% cap
  • 15 year NNN
  • High growth Charleston MSA
Valdosta, GA
  • Backup Contract Available!
  • $1,054,000/ 7.2% cap
  • 10 yrs remaining on 15 year NNN lease with options
  • Rare 3% rent bump in 11th year
Newport, TN - JUST LISTED!
  • Value Priced at $799,000 or 6.6% cap
  • NNN lease with 8 ½ years remaining
  • Operated by one of largest franchisees
  • Traffic counts over 23k per day!
Elizabeth City, NC
  • $699,000 or 7.6% cap
  • Successful NN lease with extended term
  • Last stop before the Outer Banks
  • HVAC systems recently replaced by tenant
Properties Wanted
Net Lease Properties up to $3M
East coast only
Credit tenants (auto, QSR and medical)
10+ years, NNN only
Market cap rates
Valuation Services

Would you like to see what your property would bring in today's market? CLICK HERE

The market is in short supply of quality net lease properties. You will never get more for your property than today. Don’t wait. Let us give you a no-obligation Broker Opinion of Value.
Listen to the Net Lease Experts on the CRE Show
Nancy Miller, President of National Net Lease Investments with Bull Realty and Tim Kinney, Vice President of Capital Markets with Marcus & Millichap joined Michael in Studio One to discuss what's hot in single tenant net lease. Watch Now
AMAZON + WHOLE FOODS – What a combo!!
The August 28, 2017 acquisition of Whole Foods by Amazon will bring startling changes to the grocery industry and will possible re-name “Whole Paycheck” to a more modest priced shopping alternative. In the 8/28/17 CSP Daily News, Editor, Greg Lindenberg, predicts 5 ways Amazon will transform Whole Foods:

  1. Expect innovation by bringing e-commerce to bricks and mortar grocery shopping.
  2. Expect lower prices without compromising standards.
  3. Rewards integration with the marriage of Amazon Prime with Whole Foods in a customer rewards program.
  4. Expansion of private label availability.
  5. Launching of new services such as Amazon shipping to local Whole Foods and integration of logistics, POS and merchandising systems.

With the merger, Amazon will have an estimated 2% of the US grocery market, according to GROCERY HEADQUARTERS Magazine. Let’s see what happens – if prices go down and quality goes up, the other larger changes will have to improve their “game” too – this could be good for all consumers.
Be Like Warren Buffet - Invest in Single Tenant Net Lease Assets!

In the June issue of National Real Estate Investor , Warren Buffet, Mr. Berkshire Hathaway and billionaire, demonstrated his commitment to the net lease market. He recently purchased a 9.8% stake in Store Capital Corp, a net lease REIT. The net lease investor seeks “a safe earnings stream”, diversification of tenants, passive investing, and upside income opportunities. 
Ask Nancy
Rich in Washington asks:  Nancy, I have heard that I can use my IRA to buy commercial real estate. Can I do this?

 Rich, there are a handful of firms, called that specialize as “custodians” in structuring your retirement funds into a self-directed IRA? There are several rules to follow, but this is a good strategy to essentially pay cash WITH YOUR RETIREMENT SAVINGS for your real estate investments. Investigate this well and let us know how it works out! Check this link out on a definition – they can explain it better than me!  What is a self directed IRA?
Recent Sales

  • Applebee's - Bull Realty represented the seller in the sale of this Applebee's located in Dawsonville, GA. The August 2017 transaction sold for $2,925,000 at a 6.4% cap rate. There are 15 years remaining on a 20 year NNN lease with options.

  • Biomat - Bull Realty represented the 1031 buyer in the sale of this Biomat specialty medical facility located in Columbus, OH. The April 2017 transaction sold for $3,330,940 at a 7.2% cap rate with 9 years remaining on a modified NNN lease with options.

  • Family Dollar - Bull Realty represented the buyer in the sale of this Family Dollar located in Decatur, GA. The June 2017 transaction sold for $1,942,500 at a 6.16% cap rate with a new 15 year NNN lease.

  • Dollar General - Bull Realty represented the seller in the sale of this Dollar General located in Napoleonville, LA. The June 2017 transaction sold for $865,000 at a 9.12% cap rate with 6 years remaining on a NN lease.
Bull Realty | 404-876-1640 | NMiller@BullRealty.com | www.BullRealty.com