NNN/1031 Exchange

Net Leased Properties

Net Leased Properties are real estate investments in which the owner has no management obligations and is guaranteed cash flow. The owner transfers expense responsibilities, such as property taxes and insurance, to the tenant. The tenant leases the building for a term of approximately 10 to 25 years, with defined rental increases during the term of the lease and options for renewal.​

Absolute Triple Net (NNN) Lease: ​

​Absolute Triple Net (NNN) Lease requires the tenant to pay for property taxes, insurance, and Common Area Maintenance (CAM) interior/exterior, in addition to rent.

Triple Net (NNN) Lease:

​Triple Net (NNN) Lease requires the tenant to pay for property taxes, insurance, and Common Area Maintenance (CAM), in addition to rent. The landlord is typically responsible for maintenance of the roof, sidewalls, and foundation. The correct definition is Double Net (NN Lease).

​Analyzing NNN Properties

Location

​Is the location in a busy area, anchored center, off major freeways? 
Is the location highly desirable by other tenants?

Coporate Lease​

​Is the lease backed by the corporation?

Franchisee

​If the lease is the responsibility of the franchisee, does the franchisee have a strong net worth? Does the franchisee operate several locations?

Sales

​How are sales at this location? How do they compare to other store locations?

Rent to Sales Ratio

​This ratio helps determine how the location's sales supports its rent.

Example: Rent/Sales = $100,000/$1,200,000 = 8.33%*

* For every dollar the restaurant earns in sales, 8.33% of it goes towards rent payments. The lower the percentage, the better it is. An average desirable range is 7.5%-9.5%

1031 Exchange ​

​A 1031 Exchange, also referred to as a "Like-Kind Exchange," is an important tax savings tool that can benefit real estate investors and buyers by deferring capital gains when selling property, and reallocating the all cash proceeds into a qualified replacement property of equal or greater value. The exchange does not have to take place concurrently but must be structured in accordance to Internal Revenue Code 1031. The investor has 45 days to identify the "Like-Kind"property and has a total of 180 days in which to make the acquisition.

​For more information on 1031 Exchanges, 
please click on the links below:

Internal Revenue Code 1031 
https://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

Xchange Solutions, Inc.
http://www.xchangesolutions.net/1031exchange.htm

First American
http://www.firstam.com/title/commercial/products/1031-tax-deferred-exchange-services.html

Case Studies 

215 Wheeler Ave, Redwood City, CA - Advanced Auto Parts, 1204 S. US Hwy 25, Barbourville, KY

333 Grand Blvd, San Mateo, CA - Burger King, 391 N Main St, Lansing Kansas

Seller Carry - 200 E. O’Keefe, Menlo Park, CA

Capital Gains Bypass Trust - 2095 Radio Ave, San Jose, CA

Select NNN Transactions 

Hardee's

630 Bypass 25 Northeast Greenwood, South Carolina

  • Price: $1,314,396
  • CAP: 7.5%
  • +3,328 SF building situated on +47,223 SF of land
  • New 20 year corporate lease
  • 10% fixed rent increases every 5 years
  • 2008 construction

Jiffy Lube

1755 North New Florissant Rd, Florissant, MO

  • Price: $800,000
  • CAP: 9.15%
  • 9 years remaining on the franchisee lease
  • Corner location at signalized intersection
  • Approx. 2,800 s.f. situated on .567 acres
  • Absolute NNN lease
  • Franchisee operates 400 units
  • Sold on 4/28/2011
.

Popeyes​ Chicken & Biscuits

2340 Southwest Washington Blvd., Bartletsville, OK

  • Price: $1,000,000
  • CAP: 8.50%
  • Price Per SF: $432

Taco Bueno

3426 W. Greenway Rd,
​Phoenix, AZ

  • Price: $1,000,000
  • CAP: 6.84%
  • Price Per SF: $338.07

Burger King

2110 S I Highway 35,
​Round Rock, TX

  • Price: $2,195,314
  • CAP: 7.00%
  • Price Per SF: $768

Taco Cabana

278 Central Ave,
​Hilton Head Island, SC

  • Price: $1,250,000
  • CAP: 7.20%
  • Price Per SF: $437