Single-tenant net lease cap rates up in Q1; DigitalBridge closes Landmark deal

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Cap rates across all three subsectors in the single-tenant net lease in the US climbed for the eighth consecutive quarter in the first quarter, according to a The Boulder Group report.

Overall asking cap rate stood at 6.64%, up 6 basis points from a quarter ago, according to the investment real estate service firm's first-quarter Net Lease Market Report.

Cap rate for single-tenant retail net lease properties increased to its highest level since 2014, at 6.42%. Meanwhile, cap rates for single-tenant office and industrial properties stood at 7.6% and 7.02%, respectively.

The number of net lease properties in the market grew 9.3% quarter over quarter to 4,465.

"Elevated interest rates continue to impact transaction volume which is lower than prior years," The Boulder Group said, adding that certain sellers, including merchant builders or owners with upcoming loan maturities, look to meet market pricing.

CHART OF THE WEEK: US REITs underperform broader market in Q1

⮞ Share prices for the US real estate investment trust stocks recorded a negative 1.3% total return for the first quarter, compared with the 10.6% return for the S&P 500 index.

⮞ The Dow Jones US Real Estate Regional Malls index booked an 11.1% return, the only REIT sector index that outperformed the broader market for the first quarter.

⮞ On a yearly basis, the Dow Jones Equity All REIT index tallied a return of 7.9% at the end of March, lower than the 29.9% return of the S&P 500.

Strategic partnerships

– DigitalBridge Group Inc. completed the sale of a 40% stake in Landmark Dividend LLC to a wholly owned subsidiary of sovereign wealth fund Abu Dhabi Investment Authority. Landmark Dividend is a real estate and infrastructure acquisition and development company. TAP Advisors was financial adviser to DigitalBridge, and Simpson Thacher & Bartlett LLP was legal adviser to DigitalBridge. Gibson Dunn & Crutcher LLP served as legal adviser to Abu Dhabi Investment Authority.

– Wyndham Hotels & Resorts partnered with WaterWalk for its expansion into the upscale extended stay segment. Under the agreement, 11 hotels and over 1,500 rooms will be added to the Wyndham ecosystem under the newly created brand WaterWalk Extended Stay by Wyndham.

Top deals

– EQT Exeter paid $197 million to acquire the 819,000-square-foot Commerce Way Distribution Center at 13423-13473 Santa Ana Ave. in Fontana, Calif., from Manulife Investment Management.

– Investment manager Vanguard Group Inc. acquired a 91-acre office campus within University Research Park in Charlotte, NC, for $117 million, the Charlotte Business Journal reported. The campus was originally planned as the East Coast headquarters of managed care company Centene.

US hotel performance

Three key US hotel performance metrics were down during the week ended March 30, STR reported, citing data from CoStar, which provides information and analytics on property markets.

Occupancy closed at 62.3% during the week, 5.6% lower than the comparable week in 2023. Revenue per available room was 6.3% lower at $98.83 while average daily rate was down 0.7% to $157.14.

Among the top 25 markets, New York City had the largest annual increases in each of the three metrics.

See key people moves in North America real estate.

US REIT NAV chart book for Q1 2024

NAV Monitor: US REITs close March at 15% median discount to net asset value