Upclose With Stan Johnson Company's Isaiah Harf
GlobeSt.com chats with the director about why now is a good time to sell, about what he expects out of cap rates in the coming year and where he is telling his clients to invest.
Owners who are thinking of selling should understand that current cap rates are still aggressive. That is according to Stan Johnson Co. director Isaiah Harf, who recently caught up with GlobeSt.com about what he is telling his clients today.
GlobeSt.com: What advice are you giving your clients today?
Isaiah Harf: This is a good time to sell. Because interest rates are still low, and single-tenant net-leased properties are as close to a fixed-income investment as it gets, there’s still an arbitrage between cap rates and constants. That leads to many positively leveraged situations. You’ll find a wide buyer pool for your asset. We’re coming off historic years for annual cap rate compression, and that might be over with, but stabilized cap rates are still at virtual record lows.
GlobeSt.com: How do you advise your selling clients to invest the proceeds?
Harf: Flat leases can get hurt terribly when interest rates are rising. It might be smart to sell an asset that has no rent growth, and buy something that has rent growth built in.
GlobeSt.com: Where should your clients invest?
Harf: Go where economies and populations are growing, where taxes are business-friendly, where jobs are being created. I’d want a long-term asset in an area that has matured and still has a trend to population growth, or in an area that’s not fully developed but is seeing a lot of job growth.
GlobeSt.com: What economic changes can we expect over the next 12 months?
Harf: I expect cap rates to grow 25 to 40 basis points in the coming year, because there’s less 1031 money in the marketplace, and more supply than two years ago. Owners who are thinking of selling should understand that current cap rates are still aggressive.