Sales of single-tenant retail properties — buildings leased to fast-food joints, pharmacies and other store operators — have soared to a six-year high as investors seek real estate that performs better than bonds.
Acquisitions of companies that own single-tenant buildings also are rising as landlords seek a more diverse mix of renters and lower risk. Spirit Realty Capital Inc., for example, agreed last month to a merger with Cole Credit Property Trust II Inc. in a deal valued at a record $3.66 billion, according to data compiled by Bloomberg.
So-called triple-net-lease landlords rent to pharmacy chains including CVS Caremark Corp. and Walgreen Co. and such food outlets as Chick-fil-A and Red Robin Gourmet Burgers under multiyear agreements, with tenants paying property expenses. The leases often have rent increases built in over their lifespans, providing steady cash flow and protection against rising costs, much like investing in an inflation-adjusted bond.
“It’s very stable and very predictable,” Ryan Severino, senior economist at New York-based research firm Reis Inc., said in a telephone interview. “That’s what’s been drawing a lot of interest to it.”