Originally published by ConnectCRE For the net lease sector as well as in commercial real estate at large, the economic picture remains murky, with inflation and rising interest rates at the forefront of consumers’ and investors’ minds, Northmarq (formerly Stan Johnson Company) says in a new report. Fears of a recession still loom, and there has been a noticeable decrease in consumer confidence this year.    Additionally, the industry continues to question the future of 1031 exchanges, and the upcoming mid-term elections could impact economic conditions and investor sentiment as well. Balancing out these trends are strong job growth, low unemployment, robust consumer spending and insatiable investor demand for quality assets, according to Northmarq’s Lanie Beck.   “In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” Beck reported. “Put in perspective, though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history.”   However, Beck said the fourth-quarter sales total will be telling. “The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.” 

Northmarq investment sales broker Asher Wenig completed the sale of a Class A office building located at 1741 Corporate Landing Parkway in Virginia Beach, Virginia. The 45,061-square-foot office is fully leased to Groundworks, the nation’s leading and fastest-growing foundation and water management solutions company. Asher Wenig represented the buyer, a family office based in New Jersey, who purchased the Groundworks headquarters for approximately $8.7 million without financing. The seller was a private equity firm located in Charlotte, North Carolina.  “In this market, cash is king,” said Wenig. “We were successful in negotiating a healthy yield for our client who also has the upside of bifurcating the parcel to develop a mirrored building in a strong and growing market.”  The three-story office building was built in 2008 and is situated on 14.03 acres. Groundworks operates over 64 offices and has been named multiple times to the Inc. 5000 Fastest Growing Companies, Qualified Remodeler Top 500, BBB integrity award and Best Places to Work. The site is conveniently located on Corporate Landing Parkway, just off Dam Neck Road, and neighbors various service retailers and corporate offices. 

Originally published by GlobeSt The single-tenant net lease market is likely to end the year strong, with sales activity on track to make 2022 the third strongest year in history.  That’s according to a recent analysis from Northmarq, which notes that if current activity levels carry over to Q4, the year will claim $74 billion in annual sales volume. In particular, the industrial market is set to report its second strongest year on record, while the office and retail sectors are more likely to have closer to average years.  Overall average STNL cap rates leveled out during the third quarter as sales activity declined for the third straight quarter. Private buyers have the largest share of the market, according to the report, and while the market is “significantly” off-pace to reach 2021 numbers, strong annual performance is still within reach.  “In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” said Lanie Beck at Northmarq. “Put in perspective though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history. However, fourth quarter will be telling. The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.”  Investors are still flocking to the sector, with sales activity for net-leased retail rising between 24% to 27% across the 12-month span ending in June, according to Marcus & Millichap.  “Moving forward, investors seeking long-term cash flow may capitalize on high pricing in other sectors and move equity via 1031 exchanges into less management intensive single-tenant properties,” firm analysts note. “Yield-focused buyers may target Midwest markets with increased frequency, as Detroit, Chicago, Kansas City, Cleveland, Indianapolis, Milwaukee and Minneapolis are home to average returns 30 basis points to 80 basis points above the national mean.”  © 2022 ALM Global Properties, LLC. All rights reserved.   

  Market data, charts & graphs: current and historical trends for single-tenant office, industrial and retail properties, as well as multi-tenant retail Overall market trends Market summary & analysis Economic data points To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "bb809225-7e92-422a-99c4-b811081e4f61" }); With an absence of new, shocking headlines to begin the second half of 2022, the commercial real estate market continues to face the same external influences that will undoubtedly impact how we end the year. The economic picture remains murky, with inflation and rising interest rates at the forefront of investors’ and consumers’ minds. Fears of a recession still loom, and there has been a noticeable decrease in consumer confidence this year. Additionally, the industry continues to question the future of 1031 exchanges, and the upcoming mid-term elections could impact economic conditions and investor sentiment as well. These trends, however, are balanced by strong job growth, low unemployment, robust consumer spending, and insatiable investor demand for quality assets.  In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster. Put in perspective though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history. However, fourth quarter will be telling. The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.  The multi-tenant retail sector tells a slightly different story, although the same external influences still apply. Post-pandemic, we’ve seen investor interest return in earnest to this asset class, and 2022 is well positioned to be a record-setting year for the sector. While investment sales volume has fluctuated in recent quarters, investors have eagerly been seeking out new developments, quality second-generation assets, as well as value-add opportunities.  Will we see investors apply the brakes in response to uncertain economic conditions and a continued supply-demand imbalance? Or will buyers push to get transactions completed before year-end resulting in an uptick in activity?   

Excerpt of article originally published by Commercial Property Executive Northmarq has completed its acquisition of Stan Johnson Co., a purchase that also includes Four Pillars Capital Markets, a debt/equity intermediary for CRE assets.  Founded in 1985 by its namesake, SJC has grown to become a leading middle-market net-lease investment sales brand and a top 10 U.S. middle-market firm. The company reportedly has seen an approximately 600 percent increase in revenue since 2005.  In recent years, SJC acquired Shane Investment Property Group to help support a growing multi-tenant retail focus, entered the self storage sector, and launched Four Pillars Capital Markets, which secured about $500 million in loan volume during its first year.  FPCM is a key component of the acquisition, according to Northmarq, given FPCM’s alignment with Northmarq’s established debt/equity financing team.  An SJC spokesperson told Commercial Property Executive, “Stan Johnson will remain with the company for several months to aid in the transition.”  Plans for the acquisition had been announced at the beginning of September. Industry experts at that time gave the deal a thumbs-up, indicating that the expanded Northmarq would have a stronger end-to-end investment sales platform and that SJC was not likely to break into the top tier of the net lease investment sales market on its own.  Houlihan Lokey served SJC as its exclusive financial advisor in the deal, with Bass, Berry & Sims PLC providing legal advisory services.  With the addition of SJC and FPCM to its existing multifamily sales platform, Northmarq will now offer services across all major property types, including office, health care, industrial, retail, self storage and multifamily.  The acquisition of the two firms means that Northmarq will now have almost 1,000 professionals across its investment sales, debt/equity financing, loan servicing and fund management operations. The expanded company annually transacts $23 billion in debt/equity volume and $15 billion in investment sales volume and services a commercial loan portfolio in excess of $76 billion. 

The merger provides clients with increased opportunities within all domestic commercial real estate markets  Northmarq, a leader in commercial real estate capital markets, announced today the completion of its acquisition of Stan Johnson Company (SJC), a real estate brokerage and advisory firm that focuses on investment sales across multiple asset classes. The acquisition also includes the purchase of Four Pillars Capital Markets (FPCM), a debt/equity intermediary for commercial real estate assets.  With the addition of SJC and FPCM to its existing multifamily sales platform, Northmarq will now offer services across all major property types, including office, healthcare, industrial, retail, self-storage, multifamily and more.  The acquisition of these two firms means Northmarq will now have nearly 1,000 professionals across its investment sales, debt/equity financing, loan servicing and fund management operations. The expanded company transacts $23 billion in debt/equity volume and $15 billion in investment sales volume annually, and services a commercial loan portfolio in excess of $76 billion.  “The closing of this transaction ushers in a new era for our clients and employees,” said Jeffrey Weidell, chief executive officer at Northmarq. “We’re incredibly pleased with the growth our company has experienced since entering the investment sales space in 2018 and we look forward to continuing that momentum in the years to come.”  Stan Johnson Company was established in 1985 by its namesake founder and has grown to become the #1 middle market net lease investment sales brand and a top 10 U.S. middle market firm. The company has experienced significant growth leading to an approximately 600 percent increase in revenue since 2005.  “Our valued clients have been a singular focus since day one, and they have propelled our growth and diversification during these past few years,” said Stan Johnson, SJC founder. “As we join Northmarq, our clients will continue to receive the same level of superior service they’ve come to expect, while also benefiting from an expanded geographic reach and enhanced service offerings.”  In recent years, SJC acquired Shane Investment Property Group to help support a growing multi-tenant retail focus, successfully entered the self-storage sector and launched FPCM, which secured approximately $500 million in loan volume during its first year. FPCM is a key component of the acquisition given its alignment with Northmarq’s established debt/equity financing team. Houlihan Lokey (NYSE: HLI) served SJC as its exclusive financial advisor, with Bass, Berry & Sims PLC providing legal advisory services.  “This transaction brings together our shared vision and values in a way that helps us better serve our clients’ needs,” said Travis Krueger, chief operating officer at Northmarq.  Northmarq, purchased by the Pohlad Companies in 1999, has grown steadily through a series of acquisitions. From its roots as a life company correspondent, Northmarq has added its complete agency and HUD business, new fund management and investment sales coast-to-coast.  Northmarq’s expansion into investment sales began in 2018 with just a handful of offices focused on multifamily properties. Leading up to the SJC acquisition, Northmarq had grown to 22 investment sales offices in 13 states, with plans to continue expanding this service into every market where it offers debt, equity and loan servicing. 

Originally published by GlobeSt In a move that woke up the often “staid” net lease real estate sector, REIT STORE Capital Corp. is being acquired by a partnership between global institutional investor GIC and Oak Street, a division of net lease investor Blue Owl, in an all-cash deal worth $14 billion, GlobeSt.com reported Thursday.  Industry followers said that this represents a “monster” transaction in the net lease sector that provides substantial additional scale to one of the largest existing players in Oak Street and a relatively new net lease investor in GIC.  Jeff Cox, Stan Johnson Company managing partner, tells GlobeSt.com that given the challenges of rising capital costs and potential economic headwinds, “it makes sense that parties involved would pursue this relationship. It also suggests that net lease product remains in high demand and continues to grow as a favored asset class among investors.”  Would Make It Third-Largest REIT  Scott Merkle, managing partner for SLB Capital Advisors, a real estate advisory specializing in sale leasebacks, tells GlobeSt.com that “in the normally staid net lease real estate world, this is a monster transaction” that, if consummated, will result in the take-private of the third largest publicly traded net lease REIT.  “GIC and Oak Street are acquiring one of the most prolific sale-leaseback investors that regularly deploys well north of $1 billion a year.”  As one of the largest sovereign wealth funds in the world, Singaporean-based GIC has been particularly active in U.S. real estate.  The STORE transaction represents GIC’s second investment in the U.S. net lease sector following the formation in 2021 of a new net lease retail real estate platform with RPT Realty.  Oak Street, which had $16.6 billion in AUM as of June 30, 2022, has continued its rapid growth in the sale-leaseback arena, which has been bolstered by its acquisition by Blue Owl in 2021  This year’s Q2 registered the strongest Q2 period sale-leaseback performance in both deal count (236 discrete transactions) and deal volume ($10.2bn) since SLB Capital Advisors began tracking the market.  “While sale-leasebacks are not immune to broader market choppiness, it continues to be an outstanding time for corporate owners of real estate to consider monetizing owned facilities,” Merkle said.  Deal a Bit ‘Unexpected’  David Auerbach, managing director at Armada ETF Advisors, says that the transaction highlights the demand for net lease properties as investors seek yield in the REIT space.  “With so many net lease players, I would not have expected STORE to be the first one acquired, but the move is significant since STORE is an S&P MidCap 400 constituent and follows on the heels of the O/VER merger back in November of last year.  “The transaction is significant as two of the largest players in private equity/sovereign wealth funds are partnering on the transaction and diversifying both parties’ portfolios into desirable net lease assets.”  Colleague Al Otero, portfolio manager at Armada ETF Advisors, notes that “It’s good to see a large real estate transaction come back into the marketplace as activity has slowed precipitously since the Federal Reserve started raising interest rates earlier in the year.  “The willingness of sophisticated investors to step back into the market at this time is a testament to the operating platform, underwriting prowess and asset quality that has been established at Store Capital since its inception.”  © 2022 ALM Global Properties, LLC. All rights reserved. 

We are excited to announce that industry news leader, GlobeSt.com, has named Ryan Butler, Managing Director and Partner, as a Net Lease Influencer for 2022. Ryan has a deep track record across the net lease sector, and with more than two decades of experience, he has made a consistent impact and significant contributions to the industry. Please join us in congratulating Ryan on this outstanding nomination!  Net Lease Influencers 2022 Excerpt of article originally published by GlobeSt Net lease has always been a stable asset class, attracting investors intrigued by its regular cash flow and strong fundamentals. Now it is wobbling a bit as the economic uncertainty clouds pricing but few believe that will last long. Still, it is times like these that require the best of the best to navigate the space and we are confident we have picked that crew in our 2022 net lease influencers. We hope you enjoy their stories as much as we did as we made our selections.   Ryan Butler Known for finding deals and solving problems, Ryan Butler is focused on helping clients acquire and divest net lease assets across the retail, industrial, office and healthcare sectors as managing director and partner at Stan Johnson Co. Butler’s 22 years of experience have helped him develop deep relationships in the net lease arena. During his career, he has closed $2.55 billion in sales, and in the past three years, he has sold more than $1.1 billion of investment properties across nearly 200 individual transactions. In recent months, Butler notably achieved record-low cap rates for a BJ’s Wholesale Club in Massachusetts and a McDonald’s restaurant that sold in Texas. In addition, he brokered the sale of three single-tenant retail portfolios for a combined $75.5 million. Butler’s production volume made him eligible to be inducted into the firm’s inaugural class of partners in 2020, an opportunity offered to SJC’s top sales producers that recognizes outstanding contributions and commitment to providing extraordinary service to clients. Butler serves as a thought-leader in the industry by frequently contributing to whitepapers and providing expertise on net lease for media outlets.  Reprinted and excerpted with permission © 2022 ALM Global Properties, LLC. All rights reserved. 

We are excited to share that Stan Johnson Company has been recognized as a Net Lease Influencer by industry news leader, GlobeSt.com. With more than four decades of experience, you can count on our team of professionals to help you navigate the nuances of the net lease sector.  Net Lease Influencers 2022 Excerpt of article originally published by GlobeSt Net lease has always been a stable asset class, attracting investors intrigued by its regular cash flow and strong fundamentals. Now it is wobbling a bit as the economic uncertainty clouds pricing but few believe that will last long. Still, it is times like these that require the best of the best to navigate the space and we are confident we have picked that crew in our 2022 net lease influencers. We hope you enjoy their stories as much as we did as we made our selections.  STAN JOHNSON CO. With a historical focus on the single-tenant net lease sector, Stan Johnson Co. is in its fourth decade of operation and has expanded its service platform. Founded in 1985, the firm, led by president and CEO Stan Johnson, provides acquisition, disposition, sale-leaseback, capital markets and advisory services for institutions, developers, investment funds, corporate occupiers and private investors across the US. The firm’s expertise includes single-asset and portfolio sales, as well as sale-leaseback transactions, 1031 exchanges and zero cash flow transactions that span all types of commercial assets including retail, office, industrial, healthcare and specialty properties. The firm has closed more than 6,700 net lease transactions totaling more than $42 billion in sales activity. In the past three years, Stan Johnson Co. closed more than $11.5 billion in net lease transactions, including a two-location portfolio of Midwest grocery stores for $18.7 million, a $12 million Home Depot ground lease in Ohio, a newly-built freestanding restaurant in Nashville that set a new cap rate record for the metro area, and a three-transaction portfolio that included 40 net lease properties across seven states that sold for $75.5 million. In 2021, the firm also launched an affiliate company, Four Pillars Capital Markets  — a real estate capital markets brokerage firm that provides debt and equity financing to commercial real estate investors as they acquire or refinance assets.  Reprinted and excerpted with permission © 2022 ALM Global Properties, LLC. All rights reserved. 

Across the single-tenant marketplace, office and industrial are currently the dominant property sectors in terms of sales volume contribution. With healthcare – a subset of the office sector – playing such an essential role in recent years, along with continued red-hot demand for industrial and logistics space, these sectors have combined to contribute approximately 80 percent of single-tenant property sales volume each quarter for the past four years. This percentage is up from 67 percent just a decade ago. Within the industrial market alone, we’ve seen transaction volume increase from 35 percent of the overall market in 2012 to 52 percent year-to-date 2022, illustrating a significant shift in buyer demand. Single-Tenant Office Sees Spotty Rejuvenation Post-Pandemic The single-tenant office sector had an impressive start to the year in 2022. The sector posted more than $8.0 billion in investment sales activity, securing first quarter 2022’s place as the fourth strongest quarter on record. In fact, post-pandemic activity for the office market has led to three of the top-five performing quarters in history. Despite the recent momentum, it wasn’t able to carry over into second quarter 2022, when just $3.8 billion in transactions were logged. Quarter-to-quarter, this represents a 53.1 percent drop in activity, and it’s also the lowest level of sales volume reported since the height of the pandemic. As is typical, the quarter was dotted with several higher priced transactions including the $205.5 million sale of the former Xerox facility in El Segundo, California, as well as AT&T’s corporate office in the Buckhead submarket of Atlanta that sold for $137 million. However, the highest profile transaction of the quarter was the four-property Meta campus in Silicon Valley that traded for nearly $707 million. Overall transaction count was down, but the vast majority of activity for the quarter involved smaller transactions, primarily under $25 million, with numerous sales falling below the $10-million mark. While this trend isn’t necessarily unusual, especially in the single-tenant sector where many office properties are of smaller size and price point, there was a noticeable absence of larger portfolio closings that have been prevalent in recent quarters.  Without these substantial transactions, overall sales activity naturally falls, but it doesn’t necessarily indicate a reduction in buyer demand for the sector. In just the first half of this year, private investors have taken market share away from REITs and institutional investors by being very active in the small deal space. If we study the historic dominant players for single-tenant office properties along the spectrum – from small freestanding facilities to massive corporate offices and campuses – the reduction in sales volume doesn’t feel so surprising. Could Second Quarter Activity Indicate an Industrial Slow Down? Industry experts have been suggesting for months that a slowdown is looming for the industrial sector. A number of headwinds continue to impact the market, and investment sales activity in the first half of 2022 has indeed witnessed a decline from recent record-setting periods. In second quarter 2022, the single-tenant industrial sector reported $8.4 billion in transaction volume. This was down 32.2 percent from first quarter 2022, when approximately $12.4 billion in sales were reported. When compared to the astronomically high activity reported at year-end 2021, and studying the $52-billion year as a whole, the industrial sector looks to be significantly off-pace midway through 2022. However, strip out just fourth quarter 2021, and the market is actually performing equal to the five-year trailing quarterly average and outpacing the 10-year average. Current activity appears to be right-sizing, returning to levels more in-line with a hot, but not overly frothy, market. Additionally, if investment activity doesn’t decline further in the second half of the year, 2022 could easily become the second strongest year on record. As tenants grapple with increasing rents and low vacancy, investors are watching interest rates and inflation, trying to make deals make sense. Part of today’s pullback in sales volume is likely influenced by the repricing of deals as buyers are no longer able to lock in debt at yesterday’s costs. However, with demand still very high and new supply lagging, there is no shortage of bidders on most of today’s offerings. To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "e0a86c38-f147-4bd4-8dba-8b92e71fa857" });

Orginally published by GlobeSt The single-tenant net lease sector has passed its peak performance, based on Q2 data from Stan Johnson Company.  With rising interest rates and rampant inflation, net lease investors have been watching the market very closely, keeping note of cap rate compression, sales volume, and buyer demand.  “This could be the last quarter before we start to see a reversal of [the cap rate compression] trend,” according to Lanie Beck, Stan Johnson Company Director of Corporate Research, Marketing & Communications.  “Deals being priced today will influence closing cap rates reported for third quarter 2022 and beyond, so investors must keep in mind the lagging nature of this statistic.”  In the last three months, the overall average cap rate declined 10bps and has now been below the 6%-mark for a full 12 months, Beck noted.  Q2 activity marked a decline for a second straight period, falling 35% from Q1; YOY, volume is down 17% from Q2 2021, according to the report.  Construction Low Compared to Historical Norms  Doug Ressler, Yardi Matrix, tells GlobeSt.com, “The single-tenant net lease sector is well positioned for improving fundamentals this year as construction remains low versus historical norms and more companies evolve creative hybrid office plans. This scenario is resulting in quicker rent growth in trophy office properties to backfill spaces.”  Ressler said to look for investors to focus on tenants that demonstrated resilience during lockdowns, mixed-use and adaptive reuse and that REITs are also targeting assets with high credit grade tenants and longer lease terms.  Chris Maling, principal with Avison Young, tells GlobeSt.com that while sales in the QSR sector are down to comparative quarters, this is temporary due to inflation-related shock.   “Now that consumers are experiencing inflationary pressures, we will likely see more sales at QSRs due to price-point considerations in order to feed their families,” Maling said. “Many will forgo sit-down concepts and other higher price point options. Overall, the forecast is strong for increased sales and net revenue for Q3 and Q4 of 2022.”  © 2022 ALM Global Properties, LLC. All rights reserved. 

Orginally published by Commercial Property Executive Based on its second-quarter performance, the single-tenant net lease sector is likely somewhat past its peak for this market cycle, according to a second-quarter market snapshot from Stan Johnson Co. But the true picture will probably not be revealed for another quarter or two.  Lanie Beck, SJC’s director of corporate research, marketing and communications, writes: “It’s almost certain that we’ll look back and identify fourth quarter 2021 as the true peak of this cycle.”  Similarly, despite a consensus among economists that we’re in a “technical recession,” it’s likely to be a while, perhaps year-end, before a true recession is identified, if at all, the report says.  In the meantime, after a spectacular fourth quarter of 2021, which brought end-of-year sales volume in the net lease sector to more than $103 billion, the first half of this year has seen sales volume closer to normal or average levels. “We’re likely to see more of that in the foreseeable future, pending a major market event,” Beck commented.  During the fourth quarter of 2021, single-tenant net lease sales activity topped $40 billion. The first two quarters of this year saw successive declines in sales activity to just $15.8 billion in the second quarter. Still, that figure would have been unremarkable for most of the previous 10 years.  A closer look  Specifically on the office side, second-quarter sales volume was $3.8 billion, down 53 percent from the previous quarter and down 21 percent year-over-year. Industrial volume was $8.4 billion, down 32 percent from the first quarter and down 14 percent year-over-year.  If the overall single-tenant net lease sector remains at its current pace, it should tally about $80 billion in sales for the year, which would approximately equal 2019, the second-strongest year on record. But if volume levels decline further, “the market will fall short of this target but will still have a comparatively strong year,” Beck wrote.  Cap rates in the single-tenant net lease market have compressed by 42 basis points year-over-year, falling from an average of 6.08 percent to 5.66 percent at midyear 2022.  On the office side, the single-tenant net lease investor pool has remained largely stable in its makeup. Among office buyers, private and institutional investors (each at 36 percent) are the dominant players, with REITs and foreign buyers representing only a combined 9 percent among them.  For industrial, however, institutional investors surged past REITs (now 24 percent) to take the lead at 33 percent of market share. Private buyers were responsible for 31 percent of acquisition volume, and international investors accounted for 10 percent of dollar volume in industrial, their preferred asset type, compared to office and retail.