When CPN NetLease last spoke with George Pandaleon, president of Inland Institutional Capital Partners, last fall, the subprime meltdown was still fresh news and still a harbinger of uncertainty more than anything else. Since then, the reverberations of the crisis have become all too well known, and a new \u2013 and much tougher \u2013 borrowing and lending paradigm has established itself. But has the crisis been particularly calamitous on the net lease industry? Pandaleon says no. Certainly lending conditions haven\u2019t adversely affected the $1.1 billion joint venture that Inland American and Lexington Realty Trust formed in 2007, Lease Strategic Assets Fund L.P., whose purpose is to acquire and manage net lease properties. Recently, Inland American and Lexington folded a final group of seed properties into the JV, and plan to acquire perhaps $400 million more in net-lease properties over the next two years for it. CPN: What\u2019s the outlook for buyers of net-lease properties such as American Inland and its JV partners? Pandaleon: The market is still adjusting. But going forward I believe there will be more attractive opportunities to buy net-lease assets. One reason is that corporations are now looking at their real estate assets more closely than they might have in the days when debt financing was easy. So properties will enter the net lease market in greater numbers through sale-leasebacks, as the current tough conditions continue. Sale lease-backs have been an option for some time, of course, and companies have been taking advantage of the structure, but I believe as the credit markets remain challenging \u2013 and they will for the foreseeable future \u2013 the pressure will mount to monetize real estate assets more than ever. Borrowing costs from other sources are going to remain high, and corporate earnings aren\u2019t going to be so strong. CPN: How are net-lease cap rates going to move? Pandaleon: You can\u2019t get a 75 percent loan-to-value, interest-only loan anymore, but instead you might get a 65 percent, loan-to-value loan that isn\u2019t interest only. That\u2019s just the state of the debt markets these days. That changes the numbers, and will eventually make the cap rates higher for net-leased assets. CPN: Do you see new competitors entering the net-lease space? Pandaleon: Not in vast numbers. The number of players who can buy net lease assets has been diminished by the reduced availability of debt, and it\u2019s going to stay that way for quite a while. That isn\u2019t to say, however, that there aren\u2019t still a good many solid net-lease players. It\u2019s just that the game is going to continue to require more equity capital, which makes it more attract for buyers like us who have that capital.<\/p>\n","protected":false},"excerpt":{"rendered":"
When CPN NetLease last spoke with George Pandaleon, president of Inland Institutional Capital Partners, last fall, the subprime meltdown was still fresh news and still a harbinger of uncertainty more than anything else. Since then, the reverberations of the crisis have become all too well known, and a new \u2013 and much tougher \u2013 borrowing…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21825],"tags":[],"class_list":["post-1003814217","post","type-post","status-publish","format-standard","hentry","category-finance"],"acf":[],"yoast_head":"\n