Investment grade net lease is the best place for yield in post Brexit market

Bill Gross, fund manager at Janus Capital, appeared on Bloomberg (video below) shortly after the historic Brexit vote and pointed out insurance companies, pension funds and banks are slowly going bankrupt. He laid out some simple math by explaining that these financial institutions are paying 4-8% on their liabilities while earning 1-2% on their long-term bonds. He goes on to indicate mortgage backed securities paying a 3% coupon aren’t a bad deal. Compare that to a mission critical distribution facility net-leased to an investment grade tenant for 15 years. If you’re buying right, the going in yield on this type of asset can be north of 7% unlevered and  12-14% on a levered basis. That’s before factoring in the tax benefits of owning real estate. Net lease is an excellent place to find tax efficient yield in today’s market.

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