The squeeze play on the net lease private real estate investor seems to be making quite a stir. In a market where properties are up for grabs many investors want a piece of the pie. Large investment groups like hedge funds, pension funds, and REIT’s (real estate investment trusts) are racing in and acquiring as much property as they can, making it much more difficult for the individual or private investor to be competitive in the commercial property sector.
According to the Assistant Vice President of Calkain Cos, a national brokerage based in Washington D.C., they are seeing a lot more 1031 exchange transactions happening. 1031 exchange is the process of selling a qualified property and then buying another qualified property similar in nature to defer the taxes. The problem is that for every private investor out there bidding on a property there are 3 or more institutional entities bidding to snatch up the same properties. So you can see how the individual investor could feel as though they are being squeezed out, much like a baseball player caught in the base path between the 1st and 2nd basemen running him down tossing the ball over and around him until he’s tagged out.
The determining factor as to which type of investor gets the property is all in the hands of the seller. Do they want to go to market with an aggressive cap rate and try to find a 1031 buyer, or do they want to get it done quickly?
So where does that leave the private investor? Boyd Messman, Sr. VP of Acquisitions of the West and Midwest regions for Cole Real Estate Investments in Dallas was quoted in National Real Estate Investor Magazine (www.nreionline) saying, “We are a well-oiled machine, we can process transactions as well or better than anybody in the industry, and it’s tough for the individual investor to compete with the machines.” That’s where…
How can the individual investor still have a share in the market place? Well, deals are still being made by private investors so the suggested strategy is to me competitive on prices. This means 1 of 2 things have to adjust, the yield or the upfront cost.
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