Triple Net (NNN) Leases with NNNeil Wahlgren
Mike Taravella discusses the importance of understanding your rent roll as a buyer and an owner.
Key Information:
What is a Triple Net Lease (NNN) and what does it include?
- Where is the operational risk? With the tenant!
- Who pays the expenses? Probably the tenant!
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Industrial NNN Leases
- 10-20 year leases
- Some of these tenants have been there for 30-70 years!
- Customized the building to their needs
- Typically no property management needed – 2 year inspections (as needed)
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Multi-tenant NNN
- Imagine your NNN as a bond.
- What is the ability of the tenant to pay their bills?
- Is cooperate backing the lease?
- The strength of your lease is the reliability of the cashflows
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Get quarterly reports and verify the “rosiness” of the picture. Always audit the financials and be aggressive with it!
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Renewal Risk
- Sale leaseback – Buy from the owner-operator and then lease it back for 20 years
- Short timeframes left on the lease are more of the “value add” purchase
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Debt on NNN
- CMBS Nonrecourse debt
- Big prepayment penalties
- Recourse debt
- Regional Banks
- More flexible
- Better terms
- Regional Banks
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Schools, traffic count, etc. doesn’t matter! And the dirtier the better!
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Find an investment group that does your new asset class already. Most people are willing to help each other!
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