On Tuesday, April 30th 2013, Apple Inc made history by selling $17 billion worth of corporate bonds. Investor demand for the bond issuance reached $50 billion according to reports. Apple’s 10 year bonds were priced at a 2.42% annual yield. But that’s paltry compared to owning property...Wall Street Journal Columnist Simon Constable characterized the bond issuance as "very cheap money" for Apple Inc which is another way of saying very low returns for investors.
Apple is rated AA by Standard and Poor's. An alternative to investing in a 10 year Apple bond is investing in a property leased for 10 years by a secure lease with a AA or AAA rated tenant. Doing so could produce significantly higher yields to an investor. Although very few assets that are 100% leased to Apple actually trade hands because of most owners' reluctance to sell (therefore there are few comparable data points to review), the weighted average of known investment transactions leased by Apple for 10 years have produced yields over double the bond yields provided by Apple Inc's recent issuance.
The benefit of owning an asset leased to Apple is the intrinsic value of the building itself after Apple's lease expires at the end of the 10 year term. Unlike a bond, the investor of an Apple-leased building has the option to extend the lease to Apple should they desire to stay, or lease the property to another tenant to maintain the income stream.
