What Is A Triple-Net-Lease?
A triple-net-lease is a lease in which the tenant is responsible for paying the three major expenses associated with commercial real estate ownership:
- (i) property tax
- (ii) insurance
- (iii) maintenance (including major replacement items of a capital nature such as roof, asphalt, HVAC, etc.)
3NP stands for “Triple Net Properties”
- Leases are typically long term to a qualified tenant.
- Triple net leases are less management intensive vis-à-vis other types of leases, thus requiring lower overhead.
- Triple net leases typically provide very stable cash flows with rent escalators.
Why Focus On Single Tenant, Triple-Net-Leased Properties?
- Proven growing US Market
- Hugely under serviced Canadian market – both from a capital and a customized solutions perspective
- More consistent risk-adjusted returns because of:
- (i) longer lease terms
- (ii) lower TIs and related costs
- (iii) lower vacancy rates
- Tenants are tethered to their specific locations for specific reasons including:
- (i) traffic patterns
- (ii) workforce
- (iii) replacement costs to move
- (iv) zoning
Value Creation Opportunities
- A granular, site-by-site approach to optimize each individual single-tenant location will uncover previously unrecognized sources of present and future value.
- Active portfolio management creates further revenue and capital enhancement opportunities.
- More attractive, flexible financing options given deep banking relationships.