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LAS VEGAS—GlobeSt.com was out in full force at the StanJohnson Co. party on Tuesday night at ICSC's RECon event,where Sam Alison, west region director, based inthe firm's L.A. office, noted that the west coast net lease retailmarket is robust. According to Alison, “retail property sales inWestern states during the 12 months ending March 31, 2014, were upapproximately 200%—three times greater—as compared to the sameperiod three years earlier.”

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As of March 31, 2014, he tells GlobeSt.com, the average cap ratepaid for retail properties in the West was 6.6%, lower by 105 b.p.compared to three years earlier. “West Coast-based investorsare very active. Research shows that 45% of all net leaseretail properties sold nationwide in 2013 were purchased by buyersfrom Arizona and California. Sellers from all markets shouldtap into this buyer pool.”

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When asked what makes net lease retail properties on the westcoast so attractive to investors in today's market, Alison notedthat they “offer investors greater liquidity than other real estatedirect ownership options.”

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A net lease property is the real estate direct ownership optionmost analogous to corporate bonds, he explains. “Real estate hascertain benefits over bonds like rental increases anddepreciation. A major difference between bonds and net leasesis terminal value.”

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At maturity, he says, the terminal value of a bond is its facevalue. “At the end of a lease, the net lease investor receivesan empty building.”

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Historically, he explains, “West Coast real estate hasexperienced superior rental growth and higher occupancy levelscompared to the average of all marketsnationwide. Generally speaking, investors arecomfortable paying more for properties in western states due to thehigher likelihood of finding replacement tenants willing to payhigher rents if a vacancy arises, i.e. the terminal value is higherthan the original acquisition price. Obviously, there are marketsoutside the west where rental growth and high development barriersattract aggressive pricing.”

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Check back with GlobeSt.com in the next day or so whereAlison talks about how the net lease retail market has changed overthe past few years, and who has the upper hand…buyers or sellersand why.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.