JohnHalvorson

Guardian Advisory is bullish on thesingle-tenant net lease market. The firm launched its firstsingle-tenant net lease-focused fund earlier this month, targetinga $50 million fund raise, and says that the asset class hashistorically low volatility and offers investors a passivemanagement style. In today's environment, single-tenant assets arealso offering competitive yields compared to other assetclasses.

“Single-tenant net lease properties is a market withhistorically low volatility that appeals to investors seekingpassive investments,” John Halvorson, a principalat Guardian Advisory, tells GlobeSt.com. “For example, forproperties targeted by the Guardian Net Lease Fund I, tenants areresponsible for all physical maintenance of the properties,including structure, roof, HVAC, and parking, as well as propertytaxes and utilities. This level of certainty of net cash flow andlow levels of deferred maintenance results in low volatility forproperty valuations found with these properties.”

David E.Hooston

As other asset classes have already matured, retail andsingle-tenant assets in particular are earlier in their recoverycycle due to challenges with ecommerce competition. As a result,the asset class is now offering better yields. “The NNN net leaseinvestment category today offers competitive yields and returnsagainst other real estate categories, with lower quantifiable riskand marketability; the ability to transact the sale of theseproperties in just 60 to 120 days,” David E.Hooston, a principal at Guardian Advisory, tellsGlobeSt.com. “This desirable combination of benefits is hard tofind in the real estate industry, or in other investment categoriestoday, which is why so many investors are drawn to single-tenantNNN net lease investments.”

To take advantage of the benefits in single-tenant net lease,Guardian is planning to focus on properties with in-place,long-term leases and national credit tenants. This includeshousehold names like Walgreens, CVS, O'Reilly Auto Parts and DollarGeneral. These offer a high level of stability and reliable ROI,”says Halvorson. “The fund's investment properties will havediversity of geography and purpose, and industry diversificationwith some level of insulation from the Amazon effect.“Specifically, we will be targeting properties in secondary marketsoutside of California, primarily in the sunbelt region—stretchingfrom Texas to Miami. The markets we are targeting include Phoenix,Dallas and Fort Worth—each of which continue to experience goodeconomic growth, with weather that tends to be less harsh onproperties which significantly reduces tenant's likelihood ofunintended deferred maintenance.”

The fund aims to aggressively acquire properties throughout theUS in this niche. “Our goal is to invest in 30 to 40 propertiesranging from 1,500 to 15,000 square feet,” says Hooston. “Targetedproperties will be strategically situated in premier locations withhigh traffic counts and existing or potential high storesales.”