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NET LEASE 208 • SHOPPING CENTER BUSINESS • May 2017 sold a Kohl's ground lease in Brandon, Florida, to an overseas buyer for $9.8 million for a cap rate of 5.7 percent. Another element that could keep a lid on cap rates is the spread between the 10-Year Treasury yield and interest rates, Schroeder adds. That spread today is roughly 200 basis points to 250 basis points, up from a mere 75 basis points at the pre-recession peak in 2007, he says. He believes the difference gives debt pro- viders room to maneuver. "The lending market has the ability to help keep interest rates stable," Schroeder explains. "If higher interest rates cause a tick up in cap rates, it's not going to be to the extent that it gives the market a big shock." DISCERNING LENDERS Still, net lease professionals sense that cap rates at some point could increase ma- terially, especially in light of tighter under- writing. Brokers report that lenders have become more selective on terms such as recourse and loan-to-value ratios. Non-recourse commercial mort- gage-backed security loans, for example, aren't as widely available as they were 12 to 24 months ago, states Patrick Luther, managing principal of the National Net Lease Group with SRS Real Estate Part- ners. Plus, CMBS rates have climbed as much as 50 basis points to a range of 4.75 percent to 5 percent for net lease buyers that need 65 percent to 70 percent of debt to finance a deal, he adds. Life insurance companies and local banks are providing lower cost financing but with recourse and less leverage, Luther notes. "Rising interest rates have to, and will, happen . . . they signal the end of cap rate compression," declares Luther, who is in the firm's Newport Beach office. The environment has become more challenging for buyers outside of the 1031 In late March, a private investment firm in Spain acquired a Kohl's ground lease in Brandon, Florida, with slightly less than 10 years remaining for $9.8 million, or a cap rate of 5.7 percent. CBRE's Ian Schroeder represented the seller, a private investment firm in Hawaii. us.jll.com/NetLease us.jll.com/CorporateFinance Superior institutional service led by an integrated group of net lease experts Our Capital Markets experts help investors and corporate occupiers execute the sale, purchase and recapitalization of single-tenant net lease properties anywhere in the United States, as well as optimize company performance and realize asset value. • Single-tenant investment property sales • 1031 property exchange • Sale leaseback structuring • Own vs. lease analysis • Financial advisory © 2017 Jones Lang LaSalle IP, Inc. All rights reser ved. Our national team executed over $3 billion in corporate finance and net lease transactions in 2016.