Investment in single tenant NNN leased commercial real estate as a hedge to market uncertainty

Many industry watchers predict a strong outlook for the commercial real estate sale-leaseback market through 2014. In particular, a rise in interest rates applicable to corporate credit failities would serve to stimulate companies to examine more cost-effective sources of capital. With the current climate of low interest rates and strong inflows of foreign capital into the sale-leaseback and single tenant real estate investment market, corporate and other sellers are well positioned to exit in a strong market environment.

However, investors acquiring these assets on assumptions of continued appreciation are showing a willingness to accept valuations that fail to generate cash flow relative to the investment and leave exposure of sub performing returns if appreciation stalls or drops. In this environment of likely peaking or plateauing of values, investors are well served to invest in contractually bound cash flows so as to provide a hedge to deteriorating asset values.