Our primary investment strategy is to acquire, own and actively manage a diversified portfolio of single‑tenant, income producing retail, industrial, medical and other office properties throughout the United States that are subject to long‑term net leases. In order to reduce the risks associated with adverse developments affecting a particular tenant, industry, geography or property type, we have assembled, and will seek to maintain, a portfolio that is diversified accordingly.
We have developed and implemented rigorous processes and procedures that integrate the analysis of the real estate attributes, tenant credit and lease structure of each property that we consider acquiring, which we believe allows us to acquire properties that provide attractive risk‑adjusted returns. For each property, our analysis primarily focuses on evaluating the following:
- Real Estate. Within the context of the relevant market and submarket, we evaluate the suitability of the property for the specific business conducted there and the industry in which the tenant operates, the prospect for re‑tenanting or selling the property if it becomes vacant, and whether or not the property has expansion potential. We also evaluate alternative uses for each property, as well as other potential users and estimated replacement rents.
- Tenant Credit. We evaluate the tenant’s credit profile by focusing on data and information specific to the tenant’s financial status and the industry in which it operates. For the tenant’s financial status, we evaluate, to the extent available, the tenant’s current and historical financial statements, capital sources, earnings expectations, operating risks, and general business plan. For the tenant’s industry, we evaluate, among other things, relevant industry trends and the tenant’s competitive market position.
- Lease Structure. We evaluate the tenant and landlord obligations contained within the existing or proposed lease, as well as the remaining lease term, any contractual annual or periodic rent escalations and the existence of any termination or assignment provisions.
- Tenant Retention. We assess the tenant’s use of the property and the degree to which the property is strategically important to the tenant’s ongoing operations, the tenant’s potential cost to relocate, the supply/demand dynamic in the relevant submarket and the availability of suitable alternative properties. We believe tenant retention tends to be greater for properties that are strategically important to the tenant’s business and where the potential costs to relocate are high.