Commercial NNN lease advice

[Dana Ogan]

I’m a newbie, studying about NNN leases and hoping to make a deal next week on one, so I want to be prepared. In a typical lease agreement, how are rentbincreases determined? How is initial NNN $sq/ft usually determined? Is a real estate attorney going to be well versed on this? Any advice on finding a good attorney to write the lease?

[Joel Owens]

Hi Dana,

1. Your profile does not say what state you are in which matters for NNN. Different states are cycling at various cap rates and price points for NNN right now.

2. Your post is unclear. You mention buying a NNN property but then mention having an attorney write the lease?

Buying STNL single tenant the lease is already there in place. The tenant has ZERO motivation to change anything that benefits you unless they get something in return. This is why it is critical to read the existing lease in place. I have seen some great ones, okay ones, and horribly structured leases where the developer gave in on everything just to do a deal.

Now if the property is a SALE LEASEBACK that is different as the lease terms are PROPOSED and a lease is not created yet. This is an existing building where the owners have decided to pull equity out by selling the building etc.  

You do not typically deal with CAM on STNL properties. If property is not a NNN lease you could have expenses with a NN lease for (roof,structure,utility lines,parking lot,etc.). Some have admin fees built in.

There are also ground leases, leaseholds,zero cash flow properties,etc. 

Most CAM is with MTNL ( multiple tenant centers). 

If you do not know much about this space it can payoff to have a team behind your purchase. The clients I have I already have commercial attorneys lined up, lenders,etc.

I review about a 1,000 of these a week nationally for clients STNL and MTNL properties.