As the commercial real estate (“CRE”) investment markets continue to get more complicated, there is one type of CRE investment property that has remained a favorite of many CRE investors, Single-Tenant, Triple Net (NNN) Long Term Leased Investments.
A single tenant NNN leased Investment is typically a freestanding building occupied by a well-recognized “credit” tenant who has a long-term lease (10, 15, 20 years) in the building. Triple Net “NNN” means along with the tenant’s rent payments, the tenant is responsible for all taxes, insurance and maintenance on the property. A CREDIT TENANT is typically a NATIONAL, STATEWIDE, or REGIONAL company who has a substantial net worth and history of success in business. Many of these tenants are corporations which are publicly traded on the NYSE or NASDAQ. Credit tenants always require the best locations for their particular industry and there is a serious vetting process the property goes through before the tenant commits to that location.
These NNN investment properties are very attractive to investors who are tired of the headaches from property management of apartments or commercial properties with multiple tenants and a high turnover. With single tenant, NNN leased investments there is only one tenant and the rent is guaranteed by that tenant’s corporation. The rent is often paid with direct deposit into the landlord’s bank account. .
Values and pricing of these types of investment properties use Cap Rates as a key factor. CAP Rates are the result of dividing the NOI* by the property’s value. If you paid cash for the property, your return would equate to the Cap Rate (Capitalization Rate). Cap Rates are driven by the credit worthiness of the tenant, the type of property, and of course, location, location, location!
*NOI is the Net Operating Income, after payment of all expenses excluding debt service.
SINGLE TENANT, TRIPLE NET, LEASED INVESTMENT EXAMPLES:
Taco Bell (YUM:NYSE)
Price: $1,000,000 Annual NOI $50,000
Cap Rate: 5%
Absolute Net Leased Investment with no landlord responsibilities
Fast Med Corporation
Price: $1,200,000 Annual NOI: $92,000
Cap Rate: 7.65
Price: $2,400,000 Annual NOI: $153,600
Cap Rate: 6.4%
Le Petite Academy (The Learning Care Group)
North Las Vegas, NV
Price: $2,950,000 Annual NOI: $225,500
Cap Rate: 7.5%
Advance Auto Parts (AAP:NYSE)
Price: $2,950,000 Annual NOI: $152,500
Cap Rate: 5.2%
Smart & Final (SFS:NASDAQ)
El Cajon, CA
Price: $7,400,000 Annual NOI: $388,500
Cap Rate: 5.25%
Call us today for more information on how this program could work for you!
Tony Wood, Managing Principal, Tiner Commercial Real Estate 916-390-1274
Posted on Wed, November 4, 2015
by Tony Wood