CVS Health Corp. has signed an agreement to acquire Target s pharmacy and clinic businesses across the United States in a deal valued at approximately $1.9 billion.
As we find ourselves at the dawn of the third quarter of 2014 here are six net lease market trends that are important to note:
- Investor demand is still far exceeding supply in the net lease market, which is continuing to drive cap rate compression.
- As a result of the limited supply, institutional investors are forced to become more and more creative in finding their acquisition opportunities. In most cases, institutional investors are being out-bid by private investors. In an effort to counteract this, REITs have began changing their focus to large industrial assets. The general thought is the private investor would not be competitive on an asset with a price point above $5 million. With e-commerce driving the demand for large industrial space the vacancy in that market is steadily decreasing.
- Investors chasing yield in a market with such limited supply has resulted in an uptick of activity of the “sub-investment grade” sector. follow the link above to read the rest on our home Blog
CHARLOTTE, NORTH CAROLINA – According to multiple sources, Family Dollar Stores shareholders have voted to approve a merger with Dollar Tree. The $8.7 billion bid was submitted by Dollar Tree in July of 2014.
The shareholder vote came to a 89% approval of the Dollar Tree bid against a competitive bid of $9.1 billion submitted by Dollar General in August of 2014.
Analysts say store closings as a result of the merger will be minimal. The subtle differences in product lines between the two retailers should allow them to coexist in the same markets without issue.
A triple net lease, also known as a NNN lease, is a commercial real estate lease structure in which the tenant pays rent as well as the three major expenses incurred by a property:
- Property tax
- Property maintenance
- Property insurance
Many investors choose to add triple net lease investments to their portfolio because of the significant benefits they offer when compared to other types of lease structures, such as gross percentage leases, single net, or double net leases.
Benefits for Investors
Triple net lease properties offer several benefits to investors. Generally, NNN leases offer lower risk than other investment properties and significant returns. Common net lease investments include dollar and discount stores, fast food franchises, auto stores, and pharmacies.
The major advantage of a triple net lease is that investors pass major expenses to tenants, meaning that operation costs remain low for landlords. Rent is typically lower on triple net lease investment properties, making it easier for investors to find tenants. Many times, landlords customize triple net lease agreements for specific tenants, allowing for greater flexibility and higher tenant retention.
Triple net leases also offer tax benefits to investors. As with other rental real estate properties, a triple net lease property is used by a number of asset-holders/sellers to avoid capital gains tax on their federal tax returns.
Benefits for Tenants
In addition to investors, tenants also benefit from triple net leases. Triple net leases usually offer low rent to tenants, with a slight increase after a specified number of years to adjust for inflation.
Another benefit to tenants is that, because they must pay maintenance fees and property insurance, landlords are motivated to keep a property maintained in order to attract new tenants.
Triple net leases are a smart bet for investors looking to add commercial real estate properties to their investment portfolio. Call a KW Net Lease Advisor at (817) 200-7620 to get more information about triple net lease investment properties today.