Beyond the Listings: Stealth Net Lease Strategies

High interest rates are creating obstacles for potential investors across all sectors of commercial real estate. As we have witnessed widening gaps between seller’s expectations and buyer’s willingness to pay, the coming months are not expected to be kind to those looking to liquidate. The key investment strategy for many is centered around preserving what capital is left and holding for a brighter future. In addition to unrealistic purchase prices, broker commissions, closing costs, and various legal fees need to be paid. In the net lease market, savvy investors are turning their attention to off-market properties to secure the best deal for the lowest price. These transactions offer distinct advantages for those seeking stable returns with reduced competition.?

Key Drivers for Off-Market Deals

Off-market deals inherently involve fewer competitors, giving potential buyers a strategic edge in negotiations. Without the pressure of a bidding process, investors can negotiate more favorable terms, potentially securing a better return on investment. This enhanced bargaining power provides buyers with flexibility to alter outcomes in their favor. Whether it's a specific location, tenant type, or lease structure, off-market transactions allow for a more targeted and skillful approach in building a top-performing portfolio. Off-market deals are considered to be premium properties valued below market. Creating capital market transactions not only ensures best purchase price for buyers, but incentivizes liquidation for struggling landlords.?

Net lease cap rates have already been increasing over the last 18 months. Compared to 10-year US Treasury bonds at a rate of 4.61%, the increase in cap rates is directly affected by the rise in interest rates along with many other dynamics.1 Because of this, properties are sitting on the market for longer periods and frightening owners to pursue selling. In 2023, net lease properties spent more time sitting on the market than the previous year. The marketing time in Q3 2023 increased by 25% compared to 2022, extending past 8 months. More available supply and less interested buyers leverages off-market deals to secure most favorable terms for all parties.?

Capital Markets Stimulus

The privacy and exclusivity of these deals are giving high priority for high net worth individuals trying to survive in these uncertain market conditions. Investors can navigate deals discreetly, preserving confidentiality and reduce complications associated with traditional listings. This level of confidentiality is functional for carrying out proper due diligence and ensuring transparency. Sensitive information such as title, legal implications, and property history are more easily accessible through this type of relationship.?

Like all success in the net lease industry, establishing and maintaining strong relationships with property owners and brokers is key. Networking within the market and utilizing a reputable broker can lead to exclusive deals that might not be accessible through conventional channels. A real estate professional will know the right contacts, properties, and markets, which is essential in successfully conducting off-market deals.

Conclusion

As the net lease investment market continues to evolve, off-market opportunities stand out as a strategic outlet for investors. By understanding the nuances of this investment model and leveraging the advantages these transactions offer, investors can capitalize on unknown opportunities to enhance their portfolio objectives. A healthy investment is not just about the deal sourcing, but also about the relationships forged within the industry, which can only be achieved with guidance of a professional in the field.

Our Firm

Ready to elevate your real estate portfolio? Connect with us at Winston Warren today, and harness our expert insights to transform your real estate ventures. Our strategic approach to site selection and investment in net lease properties isn't just about finding a location—it's about crafting your success story in the real estate market. Let's embark on this journey together and turn your investment goals into tangible, profitable realities. Contact us now and take the first step towards unlocking your investment potential with a team that prioritizes your success as much as you do!

Sources:

1. InterForum Holdings Inc
2. The Boulder Group