LOS ANGELES—If a good deal comes along with good yield and credits that you can get comfortable with, whether the deal is in a secondary or tertiary market isn’t the main focus. That was according to panelists on the “Investment and Transaction Outlook panel at RealShare Net Lease West on Thursday.
“We play in the sub-investment grade space,” said speaker Zackary Pasanen, VP of W.P. Carey. “We like the sub-investment grade stuff that is higher yielding. It is completely dependent on the credit. In looking at secondary and tertiary, you look at price per foot and comps are critical.”
When looking at establishing risk adjusted returns for a real estate transaction versus credit transaction, panelist Steve Maloy, EVP and director of acquisitions at ARC Properties Inc., said that you can buy any credit. “We have always been intrinsic value oriented. Credit is secondary to intrinsic value.”
Nashville will be one of the most important cities in the coming 20 years, said one panelist.
Camille Renshaw, CCIM, director and lead broker at Stan Johnson Co., advises private investors to approach the risk adjusted returns the way you would approach a stock portfolio—depending on what your goals are. “If you aren’t IRR driven, you have to think about risk adjusted returns in a different way.”
Renshaw continued that Nashville will be one of the most important cities in the coming 20 years. She also pointed out that aside from Nashville, activity will continue in places like Seattle, Los Angeles, Miami, New York and maybe Boston and Chicago from cross-boarder activity. “There is a sense that there is a safety and security here.”
If you aren’t IRR driven, you have to think about risk adjusted returns in a different way, said panelists at RealShare Net Lease West.
When moderator Sean O’Shea, managing director of the O’Shea Net Lease Advisory, a BRC Co., asked about who the competition is, Pasanen said that over the last 12 months, a lot of the deals are up against private investors. “Everyone is chasing yield as much as they can and looking for a place to park money. If it is a 10-year lease, you have to make sure that it isn’t going to cost you an arm and a leg to get someone new in there.”
W.P. Carey, which is IRR focused, really need the numbers to make sense, Pasanen said. “A lot of the private investors don’t have to focus on that as much. We are thinking what it will look like 12 years from now and if it doesn’t work, it doesn’t work.”