Sale Leaseback Summit Recap: Capitalizing on Unique Market Opportunities

More than 300 people recently attended the Sale Leaseback Summit at The Yale Club of New York, where I was the opening moderator of “The State of and the Reasons for Monetization in 2012: What are the Pros (and Cons) of Monetization in Today’s Economy?”

As you can imagine, the highly experienced panel of experts, including Paul McDowell, CEO of CapLease; William Kahane, CEO of American Realty Capital Trust; Barclay Jones of iStar Financial; and Ben Butcher, CEO of STAG Industrial (see photo to right), provided a wealth of analysis on the subject and a stimulating kickoff to the inaugural event. Leading investors, capital sources, tenants and industry service providers from around the nation attended for the important discussion and debate on monetization and other creative real estate solutions, as well as for the prime networking opportunities.

As discussed, there is an abundance of capital today, especially in the institutional quality net lease sector. Following a modest investment sales performance last year, REIT purchasing power is primed to drive the next wave of sale-leaseback acquisition activity in the office, retail, healthcare and industrial property sectors. According to SLS sources, REITs raised a record amount of capital in 2011 and their opportunities continue to grow.

“These are unprecedented times in the REIT space for capital raising — it’s really never been a better time for REITs to access capital,” Steven Marks, managing director at Fitch Ratings, told Michael Bull on a recent “America’s Commercial Real Estate Show.” “Usually one sector of the capital market is inhospitable or inaccessible to REITs, but now every class of security issuance up and down the capital stack — secured debt, unsecured debt, preferred stock, equity — is wide open.”

How REITs plan to deploy that capital and its impact on sale-leaseback activity, as well as the myriad of new investment opportunities, were ample fodder for detailed discussion at The Yale Club of New York.

Developers and investors can also take advantage of this historic capital trend by acquiring triple net assets that are less volatile due to the contractual nature of the long-term leases. Interest rates are at all-time lows and the spread between the cost of borrowing and current cap rates has created a unique environment in which buyers and sellers can benefit.

Conversely, it is a seller’s market as well. 2013 will be a great time to sell net lease properties. For companies that own their own facilities, it’s a good time to consider a sale-leaseback. Of course, they should first evaluate the cost of funds, future growth and opportunity costs. A sale-leaseback can become a great way to raise cash to expand one’s business.

The quest for yield is further enhanced by the disproportional supply of quality free-standing properties. Collectively, there is no better time to be a buyer or a seller.

Brad Thomas

Senior Vice President, Capital Markets

Bull Realty, Inc.