Originally published in the Retail Law Strategist — The Problem-Solving Tool for Retail Law, Fall 2012.
Single-tenant, triple-net-leased retail properties (NNN properties) offer an attractive option for investors seeking a long-term predictable stream of income, often (and preferably) generated by a commercial tenant with an investment-grade credit rating.
Generally speaking, in a triple-net lease (NNN lease), the tenant is directly responsible for, and therefore pays rent “net of,” three main types of expenses associated with the ownership of real estate: property taxes, insurance and building and property repair and maintenance. The common example of a retail NNN property is a standalone commercial building leased to a national brand-name pharmacy or fast-food restaurant tenant.
One of the main benefits commonly associated with investment in NNN properties is the “hands-off” nature of the investment. These assets are routinely marketed as passive “armchair” investments, with the collection of rent payments under NNN leases often being compared to the collection of coupon payments under a bond.
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