Apollo Grows Net Lease Real Estate with New Hires, $1B in Deals

SLB Capital Advisors discussed recent entrants into the Net Lease space and continued momentum in the sector with FundFire.

  • Scott Merkle discussed recent entrants into the Net Lease space and continued momentum in the sector with FundFire
  • More dedicated private funds are now in the market, along with big managers such as Ares and KKR chasing net lease deals but funneling them into broader real estate strategies, said Scott Merkle, managing partner at SLB Capital Advisors, an advisor and broker in the market. The roster of 18 REITs in the market has not grown as much in recent years, he said.
  • “There is more capital pursuing net lease deals,” he said. “There is definitely more interest in the market.”
  • Most of the market’s deal flow comes from three categories: new sale-leaseback deals in which corporate or private equity owners sell a company’s real estate assets, often to finance acquisition or growth plans; new properties purpose-built for a company that intends to lease it rather than own it over a long term; and acquisitions of properties with existing long-term leases. Many of the sale-leaseback and build-to-suit deals are for large, single tenants, and that’s where new growth is likely to emerge in the market, Merkle said.
  • “There are areas for incremental growth in those deals, though not necessarily a large jump in either area,” he said. “But this is a strong year for sale leasebacks.”
  • The rebound for net lease deals this year owes mainly to a strong mergers and acquisitions landscape, Merkle said, which has led to more opportunities for buyers to finance their efforts through a net lease transaction. The deals also have relatively attractive pricing today for borrowers, he said.
  • “As 2019 was a banner year, I don’t know that we’re going to get there,” Merkle said. “There are a lot of things that point to continued strong momentum in 2022.”