Experienced investment firms respond to changes in the commercial real estate climate, shielding their investors from the effects of a changing business landscape. But reacting to changes isn’t always enough. So, Sentinel Net Lease does more: We anticipate changes, positioning our investors to capitalize on the unique opportunities created by changes in market conditions.
By proactively tracking global and local economic and demographic trends that often drive changes in commercial real estate, we can find opportunities that have the potential for higher yields for our investors before other firms jump on board.
Sentinel Net Lease also monitors rapid changes in technology, income disparity, and consumer preferences — changes that can serve as a barometer as we acquire income-producing commercial real estate properties for our portfolio. We focus our energy and capital on three primary strategies.
Core Credit-Rated
These assets offer above-average yields (in-place cap rates between 7% to 8%) but typically have 6 to 10 years of lease term remaining. This results in a high single-digit or low-double digit annual cash-on-cash return for our investors along with potential upside upon disposition. The average tenant is credit-rated and/or offers extraordinarily strong financials with annual revenue in excess of $1 billion. Our net IRR target for this strategy is 15% to 17%.
Opportunistic Institutional
The tenants in these situations are generally credit-rated or privately held, but financially stable with annual revenue of $100MM or more. These assets offer higher yields that the Core Credit-Rated strategy (in-place cap rates between 8% to 10%) but typically have 6 years or less of lease term remaining. This results in an annual cash-on-cash return in the low- to mid- double digits for our investors along with significant potential upside upon disposition. Additional revenue beyond the proforma can be generated from entitling and/or developing excess land, as well as blending and extending the current lease into a longer-term commitment. Our net IRR target for this strategy is 18% to 22%.
Core Market Value-Add
These assets generally offer above-average yields (in-place cap rates between 9% to 11%) but very short lease duration of 3 years or less. Sentinel seeks to increase that cash flow over time by making improvements to or repositioning the property. This usually includes making physical improvements to the asset that will allow it to command higher rents or even entitling excess land for additional development. These properties are located in the top metro areas across the nation in superior locations. Given the risk profile of these transactions, we are generally targeting a net IRR of 25% for our investors.
Acquisition Criteria
Property Type
- Office, Industrial, Auto & Retail
- Stabilized & Value-Add Properties
Geography
- Stabilized Properties: Top 100 Metro Areas with an Emphasis on the Midwest and Southeast
- Value-Add Properties: Infill and High-Quality Suburban Locations in Top 25 Metro Areas
Acquisition Price
- Generally $10MM to $40MM
Return Profile
- Stabilized: In-Place Capitalization Rates of 6.50%+
- Value-Add: 25%+ Internal Rate of Return
Lease Elements
- NN or NNN Lease Preferred
- Annual Rent Increases
- Credit-Rated Tenants
Investment Period
- Stabilized: 4 to 10 Years
- Value-Add: 2 to 4 Years