St Louis, MO-based ElmTree Funds, a net-lease real estate private equity manager, had a busy 2022, completing $2 billion in acquisitions as private equity firms make big bets on net lease strategies.

The firm, one of the more established players in the space, added 23 new properties, including 20 industrial assets and three office assets to its managed portfolios.

The acquisitions represent 8.6mn square feet of Class A space with a weighted average lease term of 13.5 years – lease terms are typically more than 10 years. The properties are 100% leased to an investment-grade tenant, or a subsidiary of an investment-grade tenant, on a long-term basis.

“The properties we acquired are located in what we view as strategic markets, which we believe exhibit resilient fundamentals with growing labor forces—critically important factors for our tenants’ business operations to thrive in this tight labor market environment,” noted ElmTree CEO & Founder James Koman.

Net lease strategies are often described as a hybrid business, or an intersection between real estate and credit assets. While the underlying real estate is important, its long-term lease means the creditworthiness of the tenant is equally important.