With high interest rates and high cap rates, cash is king in the sale-leaseback market. This creates an opportunity for large institutional players with deep pockets to rapidly increase their market share.
JPMorgan Asset Management (JPMAM), the New York-based asset management arm of JPMorgan Chase, jumped into the net lease space at the end of 2023 with its acquisition of Trio Investment Group, a sale-leaseback investment firm with about $250M in assets under management.
JPMAM, which now has a portfolio of about 100 properties, has turbocharged its acquisitions activity with a goal of growing its net lease business to $10B over the next five years.
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Justin Heller, a 13-year veteran of TPG Angelo Gordon who joined JPMAM as a managing director and net lease portfolio manager in October, is overseeing a red-hot deal flow that is buying up properties at a clip of $100M per month.
“This is fundamentally a great time to be buying, and as far as deal flows goes, we are on fire,” Heller said, during a panel discussion at GlobeSt.’s net lease conference in NYC on Wednesday. “We have $1B in deal flow and we’re just scratching the surface of what can be done.”
“I think we’ll be able to do this year-in and year-out, in the traditional space of sale leaseback and through our development program,” Heller said.
JPMAM generates about 60% of its deal flow from brokers and the balance from JPMorgan’s massive internal network.
JPMAM’s growth strategy is built around speedy, all-cash long-term deals in the 7 and 8 cap range, many with 3% bumps and fundamentally strong long-term returns.
“The majority of the real estate industry I do not think has reset to higher interest rates, but net lease has,” Heller said. “I like high interest rates. The cap rates are high and make sense. I think this is a phenomenal time to be investing in net lease assets.”
JPMAM focuses on speedy transactions. “We’re in the customer service business. If they’re looking to sell the company, they care about speed,” Heller said.
JPMAM has developed with machine learning a tool that generates pricing models with AI commentary and enables JPMAM to price transactions in 24 hours. The company also has developed a seven-page triple net lease that it calls the JPMorgan Lightning Lease.
“The seven-page lease isn’t less protective, it’s extremely protective and the tenants are very happy with it,” Heller said.
JPMAM’s 100 properties average about $5M or $6M each, which Heller described as a “granular” portfolio. “It’s a granular portfolio that insulates you from downturns. and it’s a portfolio that’s highly liquid,” he said.
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