STNL Investors Flock to Day Care Assets

The once-overlooked child care center-occupied triple net leased investment category has been quickly emerging as a major food group for STNL investors. The past 12 months have proven to be a banner period for this segment with sales soaring nationally to 390 transactions and $884 million of transaction volume, and representing a 396% increase over a five-year period. Currently averaging 6.8%, with brand new 15-year corporate-guaranteed opportunities ranging in the mid-to-high 5% range, child care cap rates are typically more attractive than fast food, dollar stores, drug stores and gas stations. 

Part of the reason child care has stayed under the radar over the years, is that all but one operator is privately held and most are backed by private equity groups. The child care segment is quite active with mergers and acquisitions, however, and every year or two, a larger operator trades hands from one PE group to another.