The death of the STNL

[John McKee]

The time has come to pivot from the Single Tenant Net Lease Investments.  The investors who bought these over the last 30 years are realizing the following:

Corporate Tenants Don’t last forever.  Think Drugs Stores, Banks,and sit down casual restaurants (These are your parents stores)

Corner lots and out parcels all over America are losing value and Landlords can’t re lease it for the same rent.  Increased cap rates are devaluing these once passive investments and Landlords are struggling to hold their value, especially if they have to provide additional TI.  Buildings can sit empty for 1-2 years as well and are hard to reconfigure  

So what’s one to do?

redevelop your property into a multi tenant unit if possible

Throw in a lower paying tenant and wait

Investors?…Be the developer, not the owner of these assets and diversify!

[Evan Polaski]

@John McKee, I will say I greatly disagree with your sentiment. I agree with your post in that it is highlighting the risks that come with NNN leases, but to call it the death of an entire asset class is naive to say the lease.

I am certain there are people that are losing their shirts by being tied up in a STNL deal.  Just like there are people losing their entire investments in multifamily syndication, or retail strip centers, or buyers of office buildings.  There are also people that understand the risks of any investment, assess those risks versus potential reward, and still buy deals and make good money.

What I really hear you saying is: unsophisticated investors are likely to be burned and out of the space. But I see this same phenomena in STRs, BRRRR, fix and flips, and the asset classes listed above. Over the last 5-7 years, many people that knew nothing about real estate jumped in. We are seeing a market correction.

Market corrections are where those that simply bought into good marketers and gurus lose a lot money, while those that had been patient and/or are making careers in real estate make a lot of money.  Eventually the pendulum with swing again.  But as long as Walgrweens, CVS, Shake Shack, Dollar General, etc would rather pay rent than own their own properties, you will continue to have STNL deals.  The industry is anything but dying.