Search
 

The Net Lease Asset: Less Risk, Favorable Returns

For many investors, net leased assets are proving to be steady, low-risk alternative investments for their portfolios. Read on to learn why.

By Jonathan Hipp | Updated on November 13, 2017

Jonathan Hipp

Investors today are increasingly turning to alternative assets for their portfolios. And many of those investors are examining net leased properties as a viable addition to their portfolio.

In a lot of cases, net leased assets can provide favorable returns with less risk and minimal oversight. This is because net lease properties have the “three-C” advantage: corporate, credit, and contract.

  • Corporate. Net leased properties contain occupiers that, in many cases, are backed by national corporations or well-known regional companies. Advanced Auto, Dollar General, Kohl’s, McDonald’s and Walgreens are great examples of net lease tenants. Depending on the lease, income stream won’t dry up if the tenant leaves before the end of the lease. The corporation guarantees payments through the lease term.
  • Credit. The properties are frequently occupied by credit-worthy tenants. Even tenants carrying a level or two below a BB+ investment grade can provide a steady income stream, at little risk.
  • Contracts. The contract, or lease, on a net lease property can span 10 to 25 years, with renewal options and rent bumps. If the contract spells out an absolute net lease – also known as triple-net (NNN) – the investor doesn’t have to worry about maintenance costs, tax payments or other financials connected to the property.

Even with the benefits of net leased properties as alternative investments, there is another “c” to consider: caveats. Though caveats can be minimized with good real estate fundamentals, it would be negligent to ignore them.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.