Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.
Issue link: https://texasrealestatebusiness.epubxp.com/i/817755
46 • May 2017 • Texas Real Estate Business www.REBusinessOnline.com be peak pricing," says Ian Schroeder, a senior vice presi- dent who specializes in retail net lease investment prop- erties with CBRE in Newport Beach, California. "So long as apartments sell and fuel a bullish exchange market, it's going to keep cap rates as aggressive as they have been." Cash Considerations Typically 1031 exchange buyers need little to no debt, which also allows them to pay higher prices for assets, adds Bill Rose, first vice president and national director of the National Retail and Net Leased Properties groups with Calaba- sas, California-based Marcus & Millic- hap. 1031 exchange investors make up a good part of Marcus & Millichap's pri- vate client business and they typically pay $3 million to acquire the average net lease property, he adds. "It's not true to say that net lease asset cap rates are completely protected dur- ing a rise in interest rates," says Rose, whose firm brokered more than 2,800 retail transactions in 2016. "But they are not impacted as much as multi-tenant shopping centers are." Market and regulatory threats could derail 1031 ex- changes, however. Higher interest rates could lead to a drop off in demand in other property markets, thereby reducing the inclination of would-be 1031 exchange in- vestors to initiate a sale that would in turn necessitate an acquisition, according to Marcus & Millichap's Net Leased Retail 2017 Outlook. What's more, investors are concerned that tax reform could incorporate changes considered by Congress in recent years to water down or eliminate the 1031 exchange rule. Stan Johnson Co. brokers oversaw the sale of a 15,600-square-foot Natural Grocers asset nestled in the Rocky Mountain town of Frisco, Colorado, last year. Ryan Butler in Tulsa represented the seller while Julianna Clementi-Ryan in Chicago represented the buyer. Bill Rose Marcus & Millichap