Category: US Commercial Real Estate (10)

By John Egan, National Real Estate Investor

The investment signals Buffett’s confidence not only in Store, but also in net lease properties.

When billionaire investor Warren Buffett makes a deal, people take notice.

Such is the case with the recent purchase by Buffett’s conglomerate, Berkshire Hathaway, of a 9.8 percent stake in Scottsdale, Ariz.-based Store Capital Corp., a net lease REIT. The investment—in the form of 18.6 million privately-placed shares of common stock valued at $20.25 apiece—totals $377 million. Berkshire Hathaway is now Store’s third largest shareholder.

The investment signals Buffett’s confidence not only in Store, but also in net lease properties, says Ralph Cram, president and manager of Envoy Net Lease Partners LLC, a real estate finance company specializing in single-tenant, net leased assets. The cash infusion underscores the fact that the triple-net sector has hit bottom and is climbing back, Cram adds.

“We have seen buying activity of individual properties pick up significantly over the past 45 days,” he notes. “I believe that long-term rates falling recently has helped the triple-net market as well. So the worst has passed for now.”

The Buffett deal brings “favorable attention” to the net lease market, according to Michael Knott, managing director with Newport Beach, Calif.-based research firm Green Street Advisors. At Green Street, he tracks Store and competing net lease REITs Realty Income Corp. and National Retail Properties.

Looking solely at Store, Knott says it’s “a value investor haven” for Berkshire Hathaway. Why? He cites three reasons:

  • Buffett’s company bought its stake in Store at just 11x earnings.
  • Store represents “a safe earnings stream” backed by a diversified portfolio of properties operated by a diverse group of tenants.
  • Store’s management team enjoys a lengthy track record of success. This is the team’s third REIT, with the previous two REITs having been sold.

“The deal suggests there is value in Store’s unique platform in a fragmented net lease industry, and in management’s demonstrated history of generating favorable results for shareholders,” Knott says.

According to Knott, Store carefully evaluates and monitors its investments, and produces solid returns by taking “intelligent risks” with its underlying real estate.

On the day Buffett’s investment was announced, a number of publicly-held shopping center and mall REITs benefited from a bounce in their stock prices. So will the Buffett deal have a more sustained ripple effect on those REITs?

Read more…

*This content is brought to you by Sable International, specialists in securing secondary residency and citizenship for South Africans. Sable can help relocate yourself and your family, along with your business to the UK.

By Andrew Rissik*

The new year is a perfect time for South Africans to start planning how they will make use of their discretionary allowances to transfer large sums of money overseas without a tax clearance certificate. If you’re married, or have children over 18, you can move much more than R1 million without a tax clearance certificate in a calendar year.

Understanding your annual discretionary allowance

The single discretionary allowance (SDA) allows a South African (18 years or older) to send R1 million out of South Africa annually. Since various SDA subcategories were eliminated in April 2015 you can now use your allowance for any legal purpose abroad.

This is what SDA allows you to do:

  • Invest or advance R1 million to foreigners and South Africans living abroad, without obtaining a tax clearance certificate
  • Spend some of the R1 million per person on overseas travel, provided that the aggregate spend does not exceed R1 million per year

But how do you transfer R2 million over this period?

It’s quite simple really.

All you need to keep in mind is that every year you are given a discretionary allowance of R1 million. Your partner, if they are a South African citizen, receives the same amount. This means that over 2017 you can together send R2 million. You can choose to send this in one lump sum, or you can choose to stagger the payments over the year.

Not having to obtain a tax clearance certificate means you can transfer these funds with very little admin. The large amount that is permissible under current regulations makes it easier for you to make a serious offshore investment, rather than having to do it in dribs and drabs. But that’s a decision that you can make depending on your circumstances.

Send more than R2 million each year

Parents with children who are over 18 years old can move R1 million offshore under each child’s name without needing to get tax clearance. All you need to do is make sure your child applies, and receives, a South African tax number.

We can do their tax number application to SARS for a nominal fee of R380. Exercising this option can make a huge difference to the amount of money you can send offshore without tax clearance in a calendar year.

You can also apply for further investment allowances that require tax clearance certificates. For more information on these, and other ways of getting your money where you want it to be, pop us an email and we’ll walk you through the various allowances available to you.

Use these allowances while they’re still available

Many analysts are predicting some severe cash outflows from emerging markets following Donald Trump’s victory in the US election earlier this year.

Trump has outlined stimulus packages that could send bond yields higher in the United States. In these cases, volatile emerging currencies, like the Rand, are most at risk.

Add to this the fact that South Africa has had a history of exchange controls and a reversal in our currently liberal offshore allowances could be on the cards.

It’s only in the last decade that these rules were significantly relaxed. Should the government decide that too much money is flowing out of South Africa, it may decide to bring capital controls back into effect.

If you’re thinking about getting money offshore, it’s best to do so while you still can with ease.

We can help you make use of all your discretionary allowances. Give us a call on +27 (0) 21 657 2153 or send us an email saforex@sableinternational.com.

About Zebra REIT

Introducing a new “Asset Class” being Passive Property Investing and Opportunity to Invest in Institutional Quality Commercial Real Estate Backed By Fortune 500 Corporations, Government and other National tenants in the USA.

Our goal for Zebra REIT is to become the global conduit for low risk, quality property investments across international borders for mid-sized institutions, wealth managers, private clients and family offices.

Technology will ultimately drive distribution in real estate (making it more efficient for local and foreign investors to invest globally) and with our proprietary owned technology, we are well positioned in the rapidly growing Real Estate and FinTech investment market space to become one of the first e-REIT funds.

For more information email Bryan Smith invest@ZebraREIT.com

By David Sobelman Jan 04, 2017

While net lease remains one of the most stable asset classes, volatility and uncertainty in the market will present challenges for the sector.

We can all breathe a sigh of relief that the worry and stress of 2016 are over and we can now focus on the year ahead. Politics, interest rates and even sports have made us all wonder what could transpire and should we even try to fathom what the coming year entails.

Every interview from our nation’s leading experts, in their respective fields, begins with an explanation on our nation’s micro and macro economies with the words, “I think.” We’ve all heard it before but give it little attention when it’s spoken. For instance, a moderator asks, “Where are cap rights going in the next twelve months?” and the expert answers, “‘I think they will (insert answer here.)” Or the moderator asks, “What will happen to commercial real estate values in 2017?” and the expert answers, “I think values will (insert answer here.)” You get the picture.

But my colleagues and I, who are asked to opine on the state of the overall commercial real estate market and how tangential and outside influences may either impede or bolster the coming real estate cycle, are wondering ourselves how to navigate our and, in some cases, our clients’ decisions in the coming year.

With the vast differences in answers to the questions we’re receiving, its clear that pinpointing a specific response is 2017’s greatest challenge. Even Hessam Nadji, president & CEO of Marcus & Millichap (M&M), who is a regular face on national television and a historical proponent of bringing into account the strength of the markets, chose to publicly sell 37,296 shares of M&M stock in the final months of 2016 at a value of roughly $2.5 million. “I think” that sale may speak volumes to what his real thoughts may be on the coming market cycle.

But what we should all consider is that net lease investments have become an industry in and of themselves. The asset class is seen as one of the most stable types of commercial real estate investment, with as little as 250 basis points of variance from the trough of the recession to the peak of the market.

Compared to other asset types, that spread is very manageable for most investors. Additionally, the International Council of Shopping Centers has begun to embrace the product type as it has instituted the N3 conference series around the country: panel discussions that highlight various regional topics focused on net lease assets.

ICSC has also established the first education and information session for continuing education (CE) credits at its annual RECon conference in Las Vegas in May. These developments could be a strong indicator that the world’s largest real estate association has now embraced the building type as it has been clearly shown that the issues surrounding that market appeal to the masses. This is drastically different than just 10 years ago when a single-tenant investment was rarely mentioned outside its core practitioners.

2017 will prove to many, in and out of the net lease industry, that even in the most drastic of economic circumstances, a single-tenant property and the growing industry that surrounds the asset type will continue to resonate as the safe haven for landlords and investors.

Few investment vehicles, real estate or otherwise, provide the risk-adjusted returns of triple-net lease properties. Add in the opportunity for an appreciating real estate asset and annual returns could far outpace anything in its peer group. But despite its stability, the sector will face its challenges.

History has shown that the hurdles of the net lease sector are not solely in the ups and downs of the market, but in attempting to precisely time the market—that is this year’s biggest challenge.

David Sobelman is the founder & CEO of Generation Income Properties (a public net lease REIT) and the executive vice president of net lease brokerage firm Calkain Cos.

About Zebra REIT

Introducing a new “Asset Class” being Passive Property Investing and Opportunity to Invest in Institutional Quality Commercial Real Estate Backed By Fortune 500 Corporations, Government and other National tenants in the USA.

Our goal for Zebra REIT is to become the global conduit for low risk, quality property investments across international borders for mid-sized institutions, wealth managers, private clients and family offices.

Technology will ultimately drive distribution in real estate (making it more efficient for local and foreign investors to invest globally) and with our proprietary owned technology, we are well positioned in the rapidly growing Real Estate and FinTech investment market space to become one of the first e-REIT funds.

For more information email Bryan Smith invest@ZebraREIT.com

By James Nelson

NEW YORK CITY—For the December 2016 of the Full Nelson, I had the pleasure of sitting down with Victor Calanog, Chief Economist & Senior Vice President at Reis, to discuss the impact of the Presidential election on the New York City real estate market.

JAMES:  What do you have to say about the Presidential election results?

VICTOR: The downside seems to be out of the way.  When it looked like Trump was going to win the election, the DOW was down 800 to 900 points, and low and behold the market was up the next seven to eight trading days.  The markets appear to be taking a bet on greater economic activity resulting from things like infrastructure investments that tend to stimulate more economic activity, which is why the stock of companies like construction services rose anywhere from seven to 20 percent right when Trump was elected.  Then the questions is whether or not inflation will come at its heels, which is why the 10- year Treasuries have been rising quite a bit as well.

JAMES:  What impact does the election have on the real estate market? 

VICTOR: I was saying that Brexit would be a nonevent for commercial property fundamentals, as well as pricing in the US.  The US is perceived to be a safe haven on a risk adjusted basis, and superstar cities with real estate like New York and San Francisco are reaping a lot of those benefits given that they are real assets that are generating income.  That is the overall context as to why a lot of the geopolitical upheavals that are having an effect on other countries are largely leaving us unaffected.  The question has been raised, will a President that has a background in commercial real estate be good for commercial real estate?  I think it seems to be leading that way in terms of where investors are placing bets.  If there are deals to be had out there, people are waiting for more preferential tax treatments, if tax policies change.  We don’t believe we will see the end of 1031 exchanges, so that will benefit a lot real estate investments.  This is not going to lift all boats, but places like New York and San Francisco will likely benefit disproportionately.

JAMES:  Do you think that foreign interest in New York will continue?

VICTOR:  In relative terms, I suspect that if there are benefits to be had, if the economy keeps growing, if treasury rates don’t spike where the risk free rate is more attractive than riskier options, I suspect that any kind of foreign policy change and or boiling of the waters when it comes to how the US relates to the EU and other trading partners, a lot of that will probably be to New York’s benefit as opposed to its disadvantage.  For example, if there is any kind of effect on Brexit on the property markets it is that it probably rendered London as a safe haven for foreign investment as less of an option.  Where else will that kind money go?  New York.

JAMES:  We are witnessing a slowdown in sales in New York City.  And we would think that this decline was a result of a lot of uncertainty.  Now that we are post-election, how do you see sales activity for 2017?

VICTOR: Before the November elections we were not sure whether a Clinton or Trump administration would benefit or harm investments, real estate, or the climate in general. Now that we know Trump will be in office, what people are waiting for will be what changes to rules, regulations, need to be considered before making a commitment.  I think many are waiting on the sidelines until they are familiar with said rules.  Come January, all of these administrative changes will be rolled out in a more definitive way.  I suspect you will see a burst of economic activity at the start of next year, and let’s see how 2017 pans out.

JAMES:  If the 10-year treasury is up, what impact will that have on pricing?

VICTOR: If the 10-year Treasury rate rises past a certain level then you will see greater upward pressure on cap rates, and therefore possibly lower valuations.  But, spreads are still relatively healthy.  A 4 or 5 percent cap rate sounds low until you consider the fact that we were coming from a 1.8 to 1.9 percent 10- year Treasury.  Therefore, a 77-80 bps rise in 10-year Treasuries does not worry me as much.  On the other hand, if 10-year Treasuries climb to the 4 or 5 percent levels then you are looking at an investment comparison where you have got a 4-5 percent sure thing versus riskier alternatives like equities or commercial real estate.  I am not worried right now, but November 9th really pushed 10-year Treasuries in a way that the Federal Reserve could not do for two years.  It ended QE 3, it raised borrowing rates overnight in December 2014, it threatened to raise it again in December 2015, and still no real blip in interested rates until November 9th.  So here we are.

JAMES:  The overall development market is down substantially, and we believe it is a result of not having construction financing available. Do you think that Trump’s election might ease some of the restrictions and regulations on the larger banks? 

VICTOR: It does look like the Trump administration is leaning towards less of a regulatory burden not just for real estate companies, but for banks in general.  It is yet to be seen what kind of impact January will have on changes to regulatory burdens like HVCRE and a lot of the topics that construction financing folks are worried about.  The buzz word is will the Trump administration provide us with a definitive roadmap on which we can hang our hats; whether it means we are writing checks to finance new development or banking on not just short term interest rate movements, but shovels in the ground two years from now on a one million square foot office building that won’t see the light of day until 2019.  If we have that definitive road map, we will feel a little bit more confident about writing that check, and if not then we will probably hold back.

161110-how-trump-won-feature

Post Trump election changes will undoubtedly emerge, however economic momentum and positive demographics should sustain healthy and positive real estate fundamentals.

These prospects are bolstered by the coming reduction of gridlock on Capitol Hill as both houses of Congress and the White House come under a single party. This will support the establishment of fiscal policy, including a new budget and an increase of the debt ceiling when needed.

In addition, the potential of reduced taxes, increased infrastructure spending and deregulation could give the economy a boost over the short term. While more rapid economic growth could spark inflationary pressure and push interest rates higher, the acceleration could also generate more jobs and stronger wage growth, both positives for the commercial real estate sector. Stable 5% unemployment and 5.5 million unfilled job openings point to a tight labor market and prospects of 2.0 – 2.5 million new jobs over the next year.

Barring a significant unanticipated event, these positive drivers will be sustained into the coming year, supporting commercial real estate demand, tight vacancies and sturdy rent growth.

For copy of full report e.mail

Skyscraper buildings made from one hundred dollar money banknotes on cloudy background.

By Allen Kenney REIT.com

In the the latest episode of The REIT Report: NAREIT’s Weekly Podcast, Mike Grupe, NAREIT executive vice president for research and investor outreach, offered his perspective on the implications of real estate being elevated to a new headline sector under the Global Industry Classification Standard (GICS).

Equity REITs were moved from the financial sector to the new real estate sector at the close of trading on Aug. 31. They were joined by a number of real estate management and development companies. Overall, Equity REITs account for more than 95 percent of the equity market capitalization of the new real estate sector.

Grupe speculated that the greatest effect of the move on REIT investment would be to provide a greater level of visibility for real estate’s role in the economy and for publicly traded real estate companies.

“That visibility is important,” he said. “Up until now, REITs were embedded in the financial sector, but the financial sector also includes commercial banks, insurance companies, finance companies and other types of diversified financial companies. This change brings [REITs] to the forefront and establishes them among one of the highest 11 headline sectors of GICS.”

As a result, Grupe said, real estate will become “a much more prominent part of the conversation” for investment decision makers as they design portfolio strategies and set asset allocations. Grupe also noted that separating real estate away from the financial sector should mean that REIT stocks are more likely to trade based on underlying real estate fundamentals, as opposed to the economic factors that tend to drive financial stocks.

“I think that will create a situation in which real estate companies will be free of those other factors,” he said. “We’ll see that the valuations of the stocks and the trading activity will reflect more directly the actual developments in the real estate sector.”

Read more…

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Introducing a new “Asset Class” being Passive Property Investing and Opportunity to Invest in Institutional Quality Commercial Real Estate Backed By Fortune 500 Corporations, Government and other National tenants in the USA.

Our goal for Zebra REIT is to become the global conduit for low risk, quality property investments across international borders for mid-sized institutions, wealth managers, private clients and family offices.

Technology will ultimately drive distribution in real estate (making it more efficient for local and foreign investors to invest globally) and with our proprietary owned technology, we are well positioned in the rapidly growing Real Estate and FinTech investment market space to become one of the first e-REIT funds.

For more information email Bryan Smith invest@ZebraREIT.com

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Ray Mahlaka | 12 August 2016
It’s no secret that income-chasing South African investors have been fervent backers of offshore property stocks.

The appetite for hard currency earnings has grown in recent years, with the tally of offshore property companies on the JSE’s more-than-R400 billion real estate sector reaching 15.

Investors will soon have three more offshore property companies to choose from, including Polish-focused GTC Group and Echo Polska Properties (EPP), and UK shopping mall developer Hammerson.

Already, offshore exposure in SA’s listed property sector is about 48% (end of June 2016) compared with no offshore exposure ten years ago, the latest figures from Stanlib show. GTC Group, EPP and Hammerson might garner strong support, if the five-year trend of offshore property stocks outperforming SA-focused stocks is anything to go by.

GTC Group – which owns a €1.3 billion (R19 billion) property portfolio of shopping malls and office properties in Poland and other South Eastern Europe regions such as Serbia, Romania, Croatia and Bulgaria – is planning to list on August 18.

The Warsaw Stock Exchange-listed company won’t issue new shares, as it’s embarking on an inward listing. GTC CEO Thomas Kurzmann says the company has been eyeing South Africa, given how institutional investors have been infatuated with Poland in the past two years.

“The listing will enable us to enlarge our shareholder base and give South African investors exposure to Central and Eastern Europe (CEE) and South Eastern Europe (SEE) regions,” Kurzmann tells Moneyweb.

The company has three development projects (two office properties and a shopping mall) and upon completion will add about €1 billion (R14 billion) to its property value. It also owns land for future development.

Echo Polska Properties

EPP, which is 49.9% held by sector heavyweight Redefine Properties, is planning to list in September. The secondary listing of Echo on the JSE’s main board will coincide with its primary listing on the Luxembourg Stock Exchange.

EPP is also looking to diversify its sources of capital with the listing and provide shareholders with access to Poland through its €1.2 billion (R17 billion) portfolio of largely retail properties.

EPP’s CEO Hadley Dean says the company has the capacity to grow its property portfolio to about €2 billion (R29 billion) in the coming years, given its pipeline of properties. Echo has a 70% interest in a shopping mall development and has options to buy ten properties under developments in Polish cities such as Krakow, Wroclaw, Gdansk, Katowice, and Lodz. Poland’s economy is widely considered to be performing better than its European peers; figures by EPP show that its economy grew by 28% between 2007 and 2015.

Hammerson

The third offering to the market will be London Stock Exchange-listed Hammerson, which owns shopping malls and retail parks in the UK, France and Ireland, with a property portfolio valued at £9 billion (R155 billion). The company already enjoys support from South African investors, who hold about 10% of its stock in London.

Says Ian Anderson, chief investment officer at Grindrod Asset Management: “Hammerson’s inward listing makes a lot more sense than some of the other listings we’ve seen in the sector, given the fact it already has a large SA shareholder [base] on its register.”

Hammerson will join the ranks of its UK-focused peers on the JSE, such as Capital & Counties, Capital & Regional and Intu Properties. Given that Hammerson has a market capitalisation of £4.1 billion (R70 billion), it’s likely to be included on the JSE’s Top 40 Index.

Catalyst Fund Managers portfolio manager Zayd Sulaiman says the weakness of the rand has prompted South African investors to increase allocations into offshore property stocks. Given the stellar performance of rand hedge stocks in recent years, Sulaiman advises that investors look at long-term risk-adjusted total returns when judging the investment case of offshore property stocks

 

About Zebra REIT

Our goal is to introduce a “new asset class” being passive real estate investment and an opportunity for US and Foreign investors to invest in institutional quality commercial real estate, underwritten by Fortune 500 companies, Government and other corporate tenants in the United States.

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May 18, 2016 | Ryan Boysen | Bisnow.com

The fundamentals of the national economy and the specifics of the current DC development boom have combined to make this a great time to be in the triple net lease game in DC, according to Calkain Co’s CEO Jonathan Hipp (above on left with NYU’s Dr. Sam Chandon).

He tells us triple net lease deals continue to prosper in all sectors, but he’s noticed investors from all over the country, and sometimes even internationally, are willing to go the extra mile for the right urban retail deal in the right market and pay an extraordinary cap rate. And DC in particular is a very desirable market.

Jon says investors have been attracted to net lease deals lately because they function almost like a fixed income asset, “real estate wrapped in a bond,” as he calls it, but often deliver a higher return. Net lease deals offer investors a way to de-risk their portfolio by switching from active to passive investing, and the recent volatility in the stock markets has made those types of investments particularly attractive, he says.

On top of that, the fundamentals of the national economy continue to make for a strong outlook, with the statistics for new jobs, income growth, labor participation and unemployment claims better now than they were in 2006, according to a summary of remarks delivered by Sam, an economist and the dean of NYU’s Schack Institute of Real Estate, at a recent event hosted by Calkain.

Read full article at Bisnow.com

FRESNO UNITED STATES - APRIL 12 2014: KFC fast food restaurant in Fresno California. As of December 2013 KFC had 18875 outlets in 118 countries.

FEBRUARY 19 BY  PROPERTY METRICS

The NNN Lease, often just called the triple net lease, is a common lease structure used in commercial real estate. Despite the popularity of the NNN lease, the triple net lease structure is still commonly misunderstood by many commercial real estate professionals. In this article we’ll take a deep dive into the NNN lease, dispel some common misconceptions about the triple net lease, and then finally we’ll tie it all together with a clear and concise example.

What is a Triple Net (NNN) Lease?

First of all, what exactly is a triple net, or NNN, lease? A triple net (NNN) lease is defined as a lease structure where the tenant is responsible for paying all operating expenses associated with a property. The triple net or NNN lease is considered a “turnkey” investment since the landlord is not responsible for paying any operating expenses. With that said, in order to fully understand the NNN lease you must first understand the spectrum of commercial real estate leases.

The Spectrum of Commercial Real Estate Leases

All commercial real estate leases fall somewhere along a spectrum with absolute net leases on one end and absolute gross leases on the other end. Most leases fall somewhere in the middle and are considered to be a hybrid lease.

When most people talk about a triple net or NNN lease, they are usually thinking about an absolute net lease. However, just because a lease is called or labelled an NNN lease, does not mean it’s actually an absolute net lease. Often a lease will be called a “triple net lease” for convenience when in fact it is not.

For example, when a building is brand new the tenant may indeed be responsible for funding replacements such as the roof or HVAC systems as they wear out over time. However, on older buildings a lease can often be called triple net, but actually require the landlord to fund these capital expenditures over time, rather than the tenant.

The most important thing to remember when working with commercial real estate leases is to ALWAYS read the lease. The only way to truly understand the terms and conditions of a lease is to actually read the lease. Simple labels like triple net, full service, or modified gross, which are commonly used by brokers and landlords, will often conflict with the actual terms of the lease.

What the NNN Lease Does Not Include

Even if your lease is a true absolute net lease, a common misconception is that even a true absolute net lease covers ALL expenses associated with a property, which is not always the case. While a true absolute NNN lease with a strong tenant can be thought of as a turnkey commercial property from the landlord or investor’s perspective, even an absolute net lease has some expenses that won’t be covered by the tenant(s).

For example, it’s rare for an NNN lease to cover the accounting costs charged by the landlords CPA or legal costs charged by the landlord’s attorneys when drafting or reviewing documents. While these costs are usually small relative to the purchase price of a property, they are nonetheless not typically covered in a standard “NNN lease”.

Triple Net Lease Investment Risks

A common misconception with triple net lease investments is that they are almost risk-free. While triple net investments do offer several advantages, there are still several risks that should be taken into consideration. The primary advantages of triple net lease investments are that you get a predictable revenue stream due to the long-term leases and pass-throughs in place, and you also get a relatively hassle-free investment due to the low management requirements.

While these are compelling advantages, triple net leases also do come with several inherent risks. First, because most triple net lease investments are for single-tenant properties, tenant credit risk is important to understand. For example, not many today doubt the strength of a triple net Walgreens investment since the lease is guaranteed by the parent company, which is publicly traded and financially strong. On the other hand, it is very possible for financial strong and publicly traded tenant to fall out of favor over the term of the lease and ultimately go bankrupt. Since single tenant triple net properties are either 0% vacant or 100% vacant, this should be taken into consideration.

Another risk to consider is the risk of re-leasing. A lot of triple net investment properties are sold towards the end of a longer term lease, shifting the risk of re-leasing the property to the new owner. If the new owner does not have this skillset or a strong team to handle this, then this could present considerable tenant rollover risk.

Assessing Tenant Credit Risk in a Triple Net Lease

One important component to take into account when analyzing a triple net lease investment property is understanding the credit risk of the actual tenant(s). After all, a lease is only as strong as the tenant behind it, so analyzing the financial statements of the tenant on the other side of the NNN lease is critical in understanding downside risk.

Many single tenant triple net lease deals involve publicly traded companies such as Starbucks, Walgreens, or Arby’s. In this case it’s easy to pull up credit ratings on the companies bond issues and to also read stock analyst reports.