Wednesday, August 12, 2009
Is Net Lease Back?
Last Thursday, Globe Street’s very own Michelle Napoli reported that Realty Income Corp, one of the larger players in the REIT market with a focus on net lease investments, has begun looking at acquisitions. Specifically, CEO Tom Lewis said:
“I know there will be some modest acquisitions in the third quarter, and I’ll define that as a trickle, and we’ll see where it goes from there.” He adds, “We are looking at transactions and buying again.”
This is highly significant information because, as Lewis states himself, “it’s been about 20 months since we put out an LOI on a property.”
The fact that Realty Income’s previously muted presence is coming to an end amongst a series of acquisitions could point to the long elusive light at the end of this recession wrought tunnel. At least, as far as the net lease market goes.
And who is the culprit for this recent spat of good news?
Why it’s those two eternal forces of capitalism, who until recently were not on speaking terms: Buyers and Sellers. The gap between them seems to be closing, especially in terms of seller expectations. Which are becoming, as Lewis notes, “more realistic.” This means that for those who have prudently stored capital, the time may be now to start buying. And in a market as tumultuous as this, net lease investments with their incumbent safety, may be the place to start investing.
Bolstering this perception is a recent upgrade by Friedman & Billings Ramsey Capital of Cap Lease Funding’s target, elevating it to $6.00 from the previous $4.00. This positive development for Cap Lease Funding, which specializes in Net Leases, could very well be indicative of the entire market. Taken together with Realty Income Corp’s new dalliances, we may be seeing the beginnings of a positive trend. So look out world, there may be sunny weather ahead.