Contrarian Net Lease Strategies: Unlocking Value in Tertiary Markets

By RadCRE Research · 2026-11-03 · Market Updates

TPG Net Lease co-head Gordon Whiting outlines why sub-investment-grade tenants and purpose-built facilities present strategic upside in net lease investing.

Re-Evaluating Credit and Geography in Net Lease Strategy

In single-tenant net lease investing, institutional capital frequently gravitates toward primary markets and investment-grade corporate credit. However, rigid underwriting parameters often lead mainstream investors to overlook opportunities where risk-adjusted yields and structural alignment may be favorable [1].

Gordon Whiting, partner, co-founder, and co-head of TPG Net Lease, argues that the criteria causing traditional buyers to bypass certain facilities often form the foundation of a resilient investment thesis [1]. Bringing 33 years of experience in the net lease sector, Whiting emphasizes that manufacturing assets located in secondary and tertiary markets—particularly those occupied by companies lacking investment-grade ratings—offer distinct protective dynamics for disciplined landlords [1].

The Underwriting Mechanics of Sub-Investment-Grade Net Lease

Conventional net lease portfolios prioritize credit ratings as a proxy for tenant solvency. Yet, in specialized and purpose-built facilities, operational dependency can serve as a powerful covenant [1]. When an occupier commits capital and infrastructure to a dedicated facility, operational continuity becomes vital to the tenant's ongoing business, reducing the likelihood of lease termination or default regardless of external credit ratings [1].

Furthermore, Whiting notes that factors often viewed as headwinds—including rising interest rate environments, secondary and tertiary locations, and specialized, purpose-built physical configurations—can function in favor of the property owner [1]. The absence of broad institutional competition in tertiary footprints allows capital providers to negotiate favorable lease structures and maintain attractive entry yields that mitigate macro volatility [1].

RadCRE Perspective

"Capital allocators often mistake a lack of an investment-grade rating for operational instability," notes Majid Radaei, Founder & Principal Broker of RadCRE. "In purpose-built single-tenant assets, deep operational integration often provides stronger tenant retention than an investment-grade balance sheet operating out of a commoditized space. In net lease underwriting, true downside protection hinges on tenant mission-criticality and lease structure rather than arbitrary geographic or credit filters."

Strategic Takeaways for Institutional Capital

As debt costs fluctuate and institutional buyers re-underwrite risk premiums across the single-tenant landscape, contrarian capital continues to find yield by looking beyond gateway metros and pristine corporate credits [1]. For investors equipped to evaluate operational mission-criticality, purpose-built tertiary assets present a durable hedge against capital market dislocation [1].

Tags: net lease investment trends, single tenant net lease underwriting, TPG net lease strategy, tertiary market commercial real estate