Alternative capital for NNN deals

A rising class of alternative capital lenders is stepping in to fill the void created by retreating regional banks. These are mostly private credit funds using their own capital to make loans, charging greater spreads than banks for NNN finance. Private equity credit has been biting off banks’ net lease lending business over the years, getting increasingly aggressive in deal size. Private credit is also going after smaller loans on net lease deals, $5 million to $60 million in size!

A major source of finance for net lease property owners, i.e. the bond market, has also dried up. Strategists and analysts say that volume of commercial paper is down about 80% over last year.

Further, regional banks, who make up about 80% of all the commercial real estate net lease loans made by domestic banks, are retreating heavily. This US regional banking crisis combined with higher loan defaults on NNN net lease properties has in turn caused smaller banks to cut back on triple net lease lending.

All of this will likely shift triple net lease lending from the banks to private capital at higher spreads – of at least 170 basis points. Because a tsunami of NNN loans will be refinanced in 2023, further means that regional and small banks cannot be the sole conduits any more for the net lease sector. Alternative capital lenders are now all but necessary to the cause. Lets be aware that such capital can often be on both sides of the same deal!

So, where is the opportunity for net lease investors? Asset sales by regional banks in receivership, plus distressed loans on retail properties, could soon drench the market, creating huge opportunities for private credit and vulture investors. When it comes to refinancing, alternative lenders will go after properties that have diminished in value since being purchased at high loan-to-value ratios as these NNN property owners will need liquidity to bridge that pricing gap closer to historical values.

If you are bewildered by the opportunities facing you as a triple net lease investor, reach out to Broker Robert Gamzeh at The Triple Net Investment Group to obtain highly trusted guidance in net lease investing. For decades, Robert and his team have done nothing but successfully navigate the often time turbulent waters of NNN markets for our demanding clients. Meet us and get to know the world of difference we will make for your NNN deals.

Call 202-361-3050 today and reach Robert directly.

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