Interesting article, but one that appears to offer a Seller's perspective favoring a trend of lower cap rates. As an independent investment advisor for net leased properties, I am seeing actual documented trades on Walgreens that are largely in the 7.375% to 7.50% range. An earlier but recent article in Globe St. reported of an $11 MM sale of 2 Walgreens in Atlanta at a blended cap of 7.65%. The statement in the current article that cap rates are between 5.75% to 7.50% is accurate on the high end - but is false on the low end. If anyone out there has any hard sale comps for Walgreens that have traded in the last 9 months at less than 7.40%, let's hear about them ! Let's see the details of that 5.75% cap rate (I would love to make contact with this buyer) ! SS

That demand is being blunted by lenders who are sometimes full of particular credits. Borrowers who can't get a loan with favorable terms are passing on many deals, or those deals are seeing price adjustments, to compensate for limited acceptance by long-term lenders. Not many long-term lenders want to do loans on lousy to moderate credit tenant deals where a good potion of the initial lease term has passed, yet investors still try to buy them.

The article referenced Walgreen's and McDonalds, so their range of 5.75 - 7.50 is pretty accurate, with the smaller McD's deals trading in the 5.75% to 6% range and WAG deals in the low to mid 7's. Ground lease WAG deals seem to be in the mid 6's as well.

Scott, Thank you for your feedback. We referenced Walgreens (NYSE: WAG) as only one of the tenants that have seen a drop in cap rates over the last several months. However, it is highly accurate to say that high-credit, net lease investments (ala new McDonald's (NYSE: MCD) Ground Leases) have closed under six percent in the last 180 days. While we do not provide details on specific transactions, we invite you to peruse any internet listing service focusing on commercial real estate or net lease properties to see where cap rates fall in today's market. Again, thank you.

Mark, We do not disagree with your assessment of the buyer who requires debt. But we are finding that there are a lot of investors who are choosing to purchase these assets with all cash, mainly due to the lack of passive investment options afforded them in today's economy. There are few places to get the returns that net lease investments provide, with stable/investment grade credit, and these buyers are choosing to put their cash into these instruments (net lease properties) instead of the usual stocks, bonds, CDs, money markets, etc. Again, this has been our finding over the last 6 months.

i'm curious as to why Wags deals are coveted by high net worth investors as answers to inflation-risk, when rarely - if ever - have escallations in their rents, at least throught primary term. Thanks.

I agree with the mid 7-range caps. Two months ago I sold a credit-worthy national bank branch in Denver at a 7.4% cap. NNN lease, 19 years remaining on lease with 10% increases every 5 years. Cash buyer so there was no loan obstacle in the way. We received three full price offers and the asset ended up selling above the original asking price which was a 7.25% cap.