About NNN Leases
As an investor, you prefer investment properties with predictable cash flow. This often means properties with triple-net or NNN lease. Triple-net lease is a lease in which you get net taxes, net insurance and net maintenance expenses from the tenants. Double-net (NN) leases are less desirable as they are leases with net taxes and net insurance (or net taxes and net maintenance expenses). A lot of leases are falling between NN and NNN. For example:
· Some Walgreens leases are NNN leases with the exception that landlords are responsible for roof and structure. These leases are closer to NNN leases. Transmercial will use the notation NNN- to designate these leases.
· Most Family Dollar stores leases are NNN with landlords responsible for more maintenance expenses: roof, structure, parking lot expenses. These leases are not NN leases but closer to NN leases. Transmercial will use the notation NN+ to designate these leases.
1. Burger King in Tracy, CA: 3221 SF restaurant on an outparcel to a new Walmart-anchored shopping center with Michaels, Petco, Bed Bath & Beyond, and Staples. Adjacent to Costco. Fast growing (51% since 2000) and high income (AHI over $102K/yr) city in Northern CA. New 15 yrs absolute NNN lease. NOI $104K/yr with 7.5% rent bump every 5 yrs. $1.6M. 6.5% cap.
2. Shopping Center in Austin, TX: 41,240 SF shopping center anchored by PetSmart and adjacent to Target in a stable city. NOI $284K/yr. $3.6M. 7.91% cap.
3. Apartments in Austin, TX: 178-unit apartments in a stable market. 96% occupied. NOI $424K/yr. $5M. 8.48% cap. Just over $28K/unit.
4. Applebee’s Bar & Grill in Brooklyn Park, MN: 6000 SF restaurant on 1.02 acres lot in a prime commercial corridor in Minneapolis metro. 100% NN corp lease with 9 yrs remaining. Tenant has been at this location since 1990. NOI $70K/yr. with strong rent increases of $5-10K every 2-3 yrs. Only $795K. 8.83% cap. Store with phenomenal annual sales revenue of $1.7M in 2009.
5. IHOP in Chandler, AZ: 5687 SF24-hr restaurant on 2/3 ac outparcel to a Fry’s Supermarket anchored shopping center in a high income densely-populated Phoenix metro. New 20 yrs absolute NNN lease from a 31-unit operator. Tenant has been operating at this location for 20 yrs. NOI $157K/yr with 10% rent bump every 5 yrs. $2.1M. 7.5% cap.
6. Apartments in Phoenix, AZ: 72-unit 3-story apartments with swimming pool built in 1984 on 1.5 acres lot with 54 2-BR units. Proforma NOI $115K/yr. $1.35M. Just less than $19K/unit.
7. Taco Bueno in Amarillo, TX: 2714 SF fast food restaurant built in 2004 on ¾ acre lot on a major artery near I-40. 20 yrs NNN lease with 14 yrs remaining by a franchisee with 180 locations in TX. NOI $74K/yr. $956K. 7.75% cap.
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