Count child care assets as among the net lease categories investors should be watching. So says Milo Spector, associate director at Stan Johnson Co. We caught up with Spector for a quick Q&A on why child care assets should be on net lease investors radar. Following are excerpts from the interview. 

How does pricing for net lease early education/child care properties compare to other net lease investments?

Traditionally, child care assets have traded a bit higher in terms of cap rate compared to some of the more standard asset types, like fast food restaurants, drugstores, or auto parts stores. Many investors do not have a personal connection to the tenants or brands in the space like they do with other asset types, and that leads to a lack of knowledge about the strength and performance of the industry. Over the last few years though, we have seen cap rates really start to get more aggressive. The same deals that were getting done at a 7-8% cap rate or higher are now closing in the low- to mid-6-7% cap rate range. In my opinion, this shift has been largely driven by an increase in demand from high-net-worth individuals who are searching for higher yields and looking for solid, internet-resistant tenants.

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.