Retail's silver lining: NNN
[{"id": "dwvfn9i", "text": "NNN is going to get killed. Rising interest rates will lead to more retailer defaults. \n\nNNN is essentially a real estate backed bond, and is a good place for your entry level investor to get into the real estate game. \n\nHowever, you are only as good as your tenant, and much of the interest is in 8 cap properties, since it trades for so much more than what you could get risk free. However, when the shit hits the fan, you will see how illiquid your Taco Bell or Dollar General is in the middle of nowhere. \n\n", "replies": [{"id": "dww9n8i", "text": "There are some insane cap rates on some of the NNN retail sales, I\u2019ve seen as low as 4.5 cap.  Who  heck is buying this stuff?  ", "replies": [{"id": "dwwdhab", "text": "4.5 cap is all a location play, banking on selling it to a greater sucker later on. You would need some credit tenant like an Apple store to get that low. ", "replies": [{"id": "dwwnxyn", "text": "Walgreens is a better example.  They trade sub 5 right now.  And they are more like leveraged corporate bonds, assuming you can get positive leverage below 4.5% interest (which I see happening even right now).", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dwvl7xx", "text": "The popularity of NNN deals in retail is nice but I don't see why you would be any better off than a gross deal in defending against a retail apocalypse.  In a NNN deal you are protecting yourself against increases in the cost of insurance, property taxes, and CAM.  If the retail apocalypse comes why would these costs go up?  If you have a center 50% occupied with NNN deals and 50% vacant the Landlord is typically still covering the NNN expenses out of pocket for the vacant units...\n\nThe fact that so many of these big retailers are downright liquidating instead of doing chapter 11 these days is scary.  If they can't make it work in the peak of the cycle it's going to be a bloodbath during even a mild recession!!", "replies": [], "depth": 1}, {"id": "dwzchmp", "text": "Silver lining? Morel like stupid recklessness. I got a blast for a sub-4 cap Starbucks the other day.", "replies": [], "depth": 1}]