Single-tenant takes the lead in FL retail investment sales

FORT LAUDERDALE - When it comes to retail investment sales, single-tenant, net-leased properties are still the place to be, according to Lori Schneider, senior director of the National Retail Group for Marcus & Millichap.

Unlike multi-tenant properties, single-tenant, net-leased properties are moving well in this recessionary environment due to high demand, clear pricing, consistent underwriting, and little discrepancy between buyer and seller perceptions of the deal, Schneider said. And debt is both possible and available for these transactions, she added.

“Good credit tenant, net-leased properties will fly off the proverbial shelf,” she said.

By contrast, sales of multi-tenant retail properties are few and far between for several reasons, Schneider said. Gaps persist in buyer and seller expectations, with many buyers still waiting for REOs to materialize. Plus, debt financing with acceptable terms is still hard to find, she said.

Schneider added that owners of better-quality product are keeping the properties in portfolio to help with the cash flow of underperformers. And if owners are at all optimistic about leasing up their centers later, they won’t sell now, she said.

Also, fewer multi-tenant properties are being brought to market, in part, because the brokerage community is reluctant to list properties that are unlikely to sell, Schneider said.

“There’s less of the unproductive marketing,” she said.

Cap rates - while higher - are holding their ground, but only in the single-tenant sector, Schneider said. Cap rates for any multi-tenant deals are being determined on a case-by-case basis relative to occupancy, value of the rent roll and other factors, she said.

Buyers, said Schneider, are almost completely private party, with very few institutional purchases taking place.

“It is the people who saved their money over the last few years. Those who had been discouraged at a six cap are now buyers at eight,” she said.

“There are still people waiting for rock-bottom opportunities. Others feel we’re near the bottom now, and since there is limited activity, they can have their pick. They’re very sincere and looking for deals.”

Institutions have been less aggressive, Schneider said, because they have been preoccupied with deleveraging their own operations. They have been busy strategizing within their own asset bases, she said, and they also remain uncertain about how to price buying opportunities.

Going forward, an increase in retail investment transaction volume will depend greatly on a debt market with greater capacity and less timidity.

“Reasonable caution is something we always should have been exercising. Now we have fear and over-caution among buyers, sellers, lenders.”