Events in the world of corporate finance have lenders and investors running scared. The collapse of big names like Enron, K-Mart and Global Crossing has shaken the confidence of industry small fries and titans alike -- suddenly single-tenant deals don't seem to be the safe haven that you had envisioned. The suddenness of Enron's collapse in particular has caused unprecedented concern -- investment-grade one day and bankrupt the next. Enron's fall has made the demise of so many others before it seem comparatively predictable.

Free flow of information has contributed to the speed at which company news circumnavigates the globe. Although open to conjecture, the transmittal of information seemingly accelerates if the content is negative in nature. As such, credit ratings have started to lose their grounding. The charge of information across the planet increasingly results in credit ratings that are a lagging indicator of corporate health and well-being. In the cases concerning Enron, K-Mart and Global Crossing, the speed of information transmittal markedly exceeded the ability of the rating agencies to disseminate and opine on their respective situations. The walk from the penthouse to the outhouse has become quite short.

Does this mean that single-tenant deals are fraught with problems and should be avoided? Certainly not. The transience of credit increasingly necessitates that single-tenant transactions be approached more as real estate deals and not as credit plays. When this is the case, they become both prudent and constructive investments. Although in reality the majority of single-tenant transactions are a hybrid of the two -- real estate and credit -- the trick is to find a deal that relies more on the fundamentals of where the property is located and less on the supposed financial strength of the occupant.

The axiom "location, location, location" takes on new meaning when there is a lack of diversification or risk- sharing across multiple space users. In a single-tenant deal, the location must have unquestionable sustainability over a prolonged horizon. Not only must it be a "main and main" location, but it should also be located in a city with demographics that will prove durable. If the trend is flat or negative growth, the best advice would be to look elsewhere. Compromise credit, but never compromise either the micro or macro fundamentals of location.

Rent per square foot is another major determinate of a deal's long-term promise. One of the first questions that needs to be raised is how much is the tenant paying in relationship to market rents? Granted the property is likely to be on a prime corner, but does the rent make sense? If the tenant should fail, is the universe of replacement tenants sizable? It is essential to determine if there is something about the property that provides a unique utility to the occupant. For a rent to be truly indicative of market, other tenants will need to ascribe a like value. This needs to be demonstrable in a market study that clearly illustrates a willingness by similar tenants to pay comparable rents near the property in question. If there are no other comparable rents within a 5-mile radius, the rents in question are likely to be a product of the occupant's business plan. To achieve the objectives of most 1031 exchange investors, the rent needs to have a fundamental basis in real estate. The location must appeal to many potential tenants.

The increasing desire of owner/ operators to unburden their balance sheets or monetize their physical plant has created an abundance of opportunities for the real estate investor. As economic growth prospects appear more tepid over the long run in comparison to where they were over the past 10 years, lenders are taking a harder look at corporate credit facilities. This has resulted in constrained liquidity and has led many companies to re-examine their real estate holdings. Whereas owning facilities made sense when corporate profits exceeded the ability to reinvest in core business activities, this is almost universally no longer the case. In response, corporate America is seeking to enter into sale/leaseback arrangements with increasing frequency. The desire to access the value stored in a corporate headquarters facility or in a series of distribution warehouses has created opportunity for the 1031 exchange investor. Those looking to trade out of more involved deals into a comparatively hands off investment will find ample situations from which to choose. The trick is to weed through the cornucopia of investment choices to uncover those that make sound real estate sense.

Charles Krawitz serves as first executive vice president, real estate capital markets, with Chicago-based LaSalle Bank.

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