Sale Leasebacks Are Filling the Gap Between Corporate Capital Needs and Investor Demand

Cerberus sold Tenet Equity for $1.6 billion

Cerberus Capital Management sold its five year old net lease portfolio, Tenet Equity, to CBRE Investment Management for $1.6 billion on Monday. Tenet’s portfolio currently holds more than 200 properties totaling roughly 12 million square feet across 39 states, 26 industries, and over 65 tenants. Five years from formation to a billion-dollar-plus exit is a fast build for a real estate platform, and the speed says something about how much capital is chasing this specific structure right now.

Net lease sits between two things investors want at the same time. Bob Davenport, Global Head of Corporate Credit at Cerberus, described it as an asset class at the intersection of corporate credit and real estate. The investor owns a building. The tenant signs a long lease and pays taxes, insurance, and maintenance on top of rent. What the buyer is really underwriting is the tenant’s ability to keep paying, which is a credit question more than a property question. That appeals to institutions that want duration and predictable cash flow without taking on lease-up risk or capital expenditure exposure...

   ...more

RSK: Good idea given the current state of interest rates. Always liked triple net leases.