Triple Net Due Diligence

[Joe Strickley]

Is due diligence the same for NNN as for any other CRE, or is the focus on legal aspects of the lease? What happens if the parent/guarantor goes bust. Are landlords treated as creditors?

[Jon Klaus]

I'd think you'd want to look really hard at the tenant, really understand their business, prospects,and financials. The lease would be extremely important. It could be for 15 years with renewal options for anther 15 years and language about rent increases in various scenarios.

I'd also think hard about what you could do with the building if the tenant did flake. If it was highly customized for them it could cost a fortune to retrofit for another user.