Net Lease Frenzy

Since the downturn, investors have been flocking to net lease properties for their stability, credit, and cash flow. (Net lease properties are like a warm blanket and a mug of hot chocolate.) And the trend is only accelerating, says Stan Johnson Co regional director Jim Gibson.

Team Gibson closed $121M in net lease sales last year—above, he’s on the right (proudly showing you the power of pink) with associate director Todd Moore and research analyst Kathleen Martinez. How much is the net lease space picking up? He tells us Stan Johnson, which specializes in net lease investment sales, did $3B nationwide last year. It did $8B total in the last 20 years of business. And now Jim’s firmly entrenched in the busiest January the firm’s had since its inception in ’85.

Jim tells us all types of investors are interested in practically all types of net lease product. Drugstores are particularly attractive now, he says. (They don't call us Prozac Nation for nothin'.) Team Gibson recently sold a Walgreen’s in Conroe for $7M, some of the best pricing he saw all year. The whole process took less than 30 days, and it received multiple offers at full asking price. Part of its appeal: There are 21 years left on its NNN lease. Jim says new drugstores are pulling in low 5% cap rates nationwide (numbers he used to only see in New York and California). He sold three Walgreens in Texas last year, all below a 5.5% cap.

Healthcare is another hot sector now, Jim says, as hospitals are moving from ownership to leasing to help their balance sheets. And Stan Johnson has been doing a lot of work for FedEx; it’s been expanding and selling lots of its industrial properties. (Jim’s deals for FedEx last year ranged from $3M to over-$100M whoppers.) Jim doesn't see the net lease market losing traction soon, not foreseeing a change until there’s a significant movement in interest rates.