Net Lease Investors Can't Get Enough High-Yielding REITs

Net Lease Press Releases

 High-Yielding REITs

Desperate for income, investors can't get enough high-yielding REITs and Wall Street is rushing to supply them. Companies are lining up to convert into REITs, a step that requires approval from the Internal Revenue Service.

Prisons, cell towers and golf courses were turned into REITs in the late 1990s, Mr. Westphal says with "pretty dreadful" results that in some cases produced losses of 90% or more.

So the market is changing and investors should temper their expectations accordingly.

While owning REITs is a good idea, panic buying isn't. Many investors are dumping money-market funds or bond funds and replacing them with higher-yielding REITs, says Morningstar analyst MichaelRawson. But REITs aren't bonds; the FTSE NAREIT Equity REITs Index, a benchmark of more than 120 of these stocks, lost 37.7% in 2008, when U.S. Treasury bonds had a positive 13.7% return.

http://online.wsj.com/home-page

UPREITS: TAX-DRIVEN CONVERSIONS FOR PROPERTY OWNERS

One of the more under-discussed aspects of the REIT is how it can benefit a seller of real estate. By contributing a property to a REIT you can achieve many of the same benefits associated with a §1031 exchange including deferral of gain recognition not to mention several other potential advantages. For the owner looking to monetize their investment in a tax advantaged manner with the possibility of additional upside this option deserves some additional examination. 

Click here for more Information about REIT 

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Net Lease Cap Rates Press Releases

Net Lease Press Releases 

Net lease cap rates fell by 25 basis points in 2011. The primary drivers of this trend are lack of product (especially high quality product) and an ease in lending conditions.


Construction of new net lease product continues to flow at a trickle while financing has become more available – with local and regional banks competing with insurance companies for credit tenant deals. Investors have shown the willingness and ability to invest but are hindered by lack of product to satiate their demand. This lack of supply and increase in demand has forced prices up and cap rates down – many would argue that 2012 promises to be a seller’s market in 2012.


 It is worth noting that these numbers illustrate the average trend in net lease cap rates and the net lease market itself is highly diverse depending upon tenant, lease terms and location. Though these factors have always been significant, their effects have recently compounded. Investors have shown a preference for high quality tenants in prime – urban and suburban – locations and are willing to pay some of the highest prices in recent years to obtain them. Cap rates in prime markets can be up 125bps lower than the charted averages of many segments. However, investors are increasingly showing interest in properties containing lower credited tenants or located in secondary locations – exchanging risk for higher returns. 


Net lease investments continue to gain traction as an alternative investment instrument for cash flow and yield investors.


Read full report here.