Shopping Centers Today International

MAR 2016

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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roadstone net Lease cLosed out last year with a tasty deal: the acquisition of 18 red Lobster properties across 14 states for $74.4 million. the private reIt, which is managed by rochester, n.Y.–based Broadstone real estate, now owns 340 single- tenant net-lease properties. B eXcess deMand MORE INVESTORS COMPETE FOR A DWINDLING SUPPLY OF SINGLE-TENANT NET LEASE PROPERTIES By Steve Bergsman M A R C h 2 0 1 6 / S C T 47 In the fourth quarter there were 3,061 retail properties on the market in the U.s., com- pared with fewer than 400 office or industrial properties, according to the Boulder Group, a brokerage firm based in northbrook, Ill. But while demand for single-tenant net lease continues to gain momentum, the sector may be facing some headwinds this year because of rising interest rates and an imbalance between supply and demand. reIts buy big, as the red Lobster portfolio acquisition attests, but this remains a market dominated by mom-and-pop investors, usually 1031 exchange (sell one property, reinvest the proceeds to defer capital gains) investors. as the phrase implies, single-tenant net lease properties are those in which a single ten- ant, such as a Burger King restaurant, pays the lease, taxes and property expenses. sometimes these are known as triple-net — or nnn — leases, because the tenant agrees to pay the real estate taxes, the building insurance and the maintenance, plus other fees. although almost any sort of property may be single-tenant net lease, most are retail properties. "People buy these nnn properties for the passive income they can get from investment- grade tenants, long-term leases and no maintenance costs," said alan Fruitman, president of 1031tax.com and author of The NNN Triple Net Property Book. the 1031 exchange investors generally pay a premium over institutional buyers because © R i v e R N o R t h P h o t o g R a P h y

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