CPN - September 2008 - (Page 23) INDUSTRY PULSE NET LEASE as he noted, those days are gone, at least for the time being. Real Capital Analytics Inc. data illustrates just how dramatically the conduit pullback has affected net lease financing. During the 12 months ending with June 2007, conduits were funding one of every three debt dollars that were financing sale-leasebacks.Wall Street’s share has since fallen to just 1 percent. Given the far more conservative leverage that banks and life companies are offering the net lease market today, investors without immediate asset-to-cash equity are having a tough time competing, Blankstein added. “When the available loan proceeds get cut by 15 or 20 percent, it nearly doubles the amount of cash equity you need,” he continued. “And that not only affects the number of deals you’re able to close, it hurts your IRRs, as well.” Specifically, lower leverage, wider mortgage spreads and amortizing debt, as opposed to interestonly debt, all tend to diminish a transaction’s equity yield. Hence, net lease investors are predictably striving to close deals at higher cap rates to compensate for the altered debt environment, explained Richard Ader, managing partner for net lease investor U.S. Realty Advisors L.L.C. With gaps of 25 to 50 basis points between the cap rates that sellers and buyers are typically targeting these days, he acknowledged that his company’s own For more net lease stories, visit www.cpnonline.com/finance. WE DON’T JUST SEE YOUR VISION. WE SEE IT THROUGH. $163.2 Million Emeritus Corporation they prefer shorter lease terms despite the tough market. ® A large percentage said they consider a combination of real estate quality and tenant credit; few are emphasizing real estate quality alone, despite frequent observations to the contrary. ® Investors admit to reluctance to spring for green property; “the underlying market is still driven by return,” Hipp observed, also noting that a preference for industrial property, followed by retail, is probably influencing the lack of a green bent, as sustainable design is occurring more often in the office sector. If you are looking outside the United States to buy net lease properties, where are you looking? North America Central & South America Europe Asia I'm not looking overseas. 63% 10% 7% 10% 10% Classic Residence at Silverstone CCRC Scottsdale, AZ Senior Secured Credit Facility Lead Arranger & Administrative Agent $195 Million Windsor Healthcare Norwood, NJ $69.2 Million 19 Senior Housing Communities within 11 States (1,564 units) Acquisition Loan Mortgage Credit Facility Freddie Mac Senior Secured Credit Facility Lead Arranger & Administrative Agent Emeritus Corporation Assisted Living 3 Properties in Various Locations Fannie Mae 10-Year $25 Million Note KeyBank 3-Year $13.4 Million Term Loan $38.8 Million Erickson Retirement Communities CCRC Hilliard, OH Construction Revolver Financing Lead Arranger & Administrative Agent $90 Million Aljoya House at Mercer Island, LLC Independent Living Facility Mercer Island, WA Senior Secured Credit Facility Lead Arranger & Administrative Agent Comprehensive. Customized. Consistent. In the world of real estate, circumstances can change in an instant. Our clients look to us to provide fast, innovative solutions and certainty of execution. As one of the country’s largest healthcare real estate lenders, we not only share our clients’ vision, we also make sure it becomes a reality. How much of a premium would you pay to own a sustainable (green) single-tenant net lease property? None 1 - 25 basis points 26 - 50 basis points 51 - 75 basis points 3% 38% 41% To contact a nationwide representative near you, call 1-888-KEY-2221 or visit key.com/healthcare today. 17% Securities products and services such as investment banking and capital raising are offered by KeyBanc Capital Markets Inc. Member NYSE/FINRA/SIPC. Banking products are offered by KeyBank National Association. Credit products are subject to credit approval. ©2008 KeyCorp PROUD SPONSOR www.cpnonline.com • September 2008 • COMMERCIAL PROPERTY NEWS 23 http://www.cpnonline.com/finance http://key.com/healthcare http://key.com/healthcare http://www.cpnonline.com
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