A single-tenant triple-net (NNN) property is a property which is 100 percent leased to one tenant with a lease structure in which the tenant is responsible for all property related expenses. Triple net refers to the tenant’s responsibilities for paying all property operating costs including but not limited to real estate taxes, building operating costs, and property insurance as well as all charges for building maintenance, repairs and replacement of all mechanical systems, the roof, the parking lot, etc. In the alternative, a single or double net lease may mean the tenant is only responsible for a portion of property taxes and/or a portion of building operating costs.  In addition, the burden of repairing and/or replacing the roof, the HVAC system and parking lot repaving falls to the landlord or to be shared with the landlord.

1. It’s a great option for an investor looking to do a similar kind of tax-free exchange to avoid paying federal capital gains tax.
2. Single tenant triple net retail properties are extremely suitable for passive investors preferring no property management responsibilities.
3. There are no landlord/buyer responsibilities whether the asset is acquired as a fee simple (ownership of the land & building) or ground lease (ownership of the ground only).  Typically, the landlord has no billing responsibilities to tenants who are responsible to pay all expenses as described above in addition to the base rent. In addition, most tenants deposit the base rent in a landlord designated bank account and pay other charges directly to the municipality, utility companies, insurance companies and etc.
4. No property maintenance is required since the tenant is responsible for all repairs, snow plowing, grounds care, parking lot paving and striping, etc.
5. In times when other types of investments such as the stock market have significant swings in value, single tenant triple net retail can add a stability factor to an investor’s portfolio.  

Single tenant triple net asset transactions can be priced at a cap rate of 4-9% allowing the holder of these assets the opportunity to determine varying degrees of risk. In theory, the lower the pricing of the cap rate of such a property, the higher the price and conversely the higher the cap rate may mean the greater degree of risk associated with such a transaction.

It is important that the single tenant triple net retail investor has advisors to evaluate the legal (review of the lease, purchase and sale contract, financing documents, and title and arrange title insurance), a CPA (to review the tax free exchange & financial matters), a Qualified Intermediary (to facilitate a tax free exchange), arrange the financing, if required, and people to establish and review the due diligence checklist.  Finally, an informed commercial real estate professional is required to assist in identifying the Single Tenant Net Leased assets on the market that meet a client’s investment criteria.  

If requested by the investor, an agent should be prepared to introduce their client to various types of financing options through insurance companies and other financing vehicles through mortgage bankers, mortgage brokers and other sources that offer the most attractive business deals.  Based on Godino and Company’s experience, we see insurance companies nationally that like to make these types of loans at very attractive rates. When requested by our clients, we assist in assembling team members that the investor does not have in place to deal with the selection process, the financing aspects, the legal, accounting and the due diligence review process etc.  Should you like to learn more, please contact Godino and Company to discuss how we can assist you in your search for a single-tenant triple-net (NNN) property.