Real-estate Investors Target Small Businesses as Market Heats Up

A new variety of real estate companies buy buildings captured by gas stations, doctors' offices and corner grocery stores. They see an open hole because large asset managers often avoid these properties they consider to be risky.

A New York-based company, Withco that signs rent to own deals with small businesses has raised $30 million in venture funding from backers including Founders Fund, Canaan Partners, Lennar Corp, actor Will Smith and athletes Venus Williams and Kevin Durant. 

Keyway, another New York-based company is buying buildings from small businesses and then leasing them back. The company said that it landed a $70 million debt facility from a group of banks to fund its acquisitions earlier this month. 

These firms are the example of real-estate investors venturing into more obscure corners of the property market. They are seeking to purchase unconventional properties along with cold storage facilities and short term rental homes. 

Over the past 18 months, more investment funds have been buying up properties with a single tenant, including properties by small businesses as well. Store Capital Corp, a real estate investment trust focused on the sector, said it invested around $1.5 billion in 336 properties last year.