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Resources8 guides · 60 terms

Net lease, explained plainly.

Evergreen guides, a glossary written for landlords, and the primary sources we use to underwrite tenants.

Guides

What Is a NNN Lease? A Landlord's Guide to Triple Net
How triple net leases work, what tenants and landlords each pay, how NNN differs from NN and absolute NNN, and what to check before you buy.
How Cap Rates Work in Net Lease
What a net lease cap rate measures, what moves it, why it is not a total return, and how to compare cap rates across deals fairly.
1031 Exchange Timeline for Net Lease Buyers
The 45-day and 180-day rules, qualified intermediaries, identification rules, and boot, explained for investors buying net lease replacement property.
How to Read an FDD as a Landlord: Items 19, 20 and 21
Use the Franchise Disclosure Document to judge the brand behind a franchisee net lease tenant: unit economics, closures, and franchisor finances.
Corporate vs. Franchisee Guarantees in Net Lease
How corporate and franchisee lease guarantees differ, why they price differently, and how to underwrite each one as a net lease investor.
Ground Lease vs. Fee Simple in Net Lease
How ground leases and fee simple net lease deals differ in risk, pricing, depreciation, and reversion, and how to choose between them.
Evaluating Dark Store Risk in Net Lease
What it means when a net lease tenant goes dark, how go-dark and recapture clauses work, and how to underwrite the risk before you buy.
Sale-Leaseback Basics for Net Lease Investors
How sale-leasebacks work, why companies use them, and which lease terms buyers should negotiate when structuring a new net lease.

Glossary

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1031 ExchangeA tax-deferral strategy under IRC Section 1031 that lets investors reinvest real property sale proceeds into like-kind property without recognizing gain.Absolute NNN LeaseA net lease where the tenant pays every property cost, including roof, structure, and capital replacements, leaving the landlord with no expense obligations.Assignment and SublettingLease provisions governing whether the tenant can transfer the lease or sublease the space to another party, and whether the original tenant stays liable.AUV (Average Unit Volume)The average annual sales per location for a restaurant or retail brand.Blend-and-ExtendA lease modification where the landlord grants a rent adjustment in exchange for the tenant extending the lease term.BootCash or other non-like-kind value received in a 1031 exchange, which is taxable to the extent of the gain.Build-to-SuitA development where the landlord constructs a building to a specific tenant's specifications, and the tenant signs a long-term lease before or during construction.CAM (Common Area Maintenance)Charges paid by tenants for operating and maintaining shared areas such as parking lots, landscaping, and lighting.Cap Rate (Capitalization Rate)A property's annual net operating income divided by its purchase price, expressed as a percentage.Co-Tenancy ClauseA lease provision that reduces rent or allows termination if specified anchor tenants or occupancy levels at a center are not maintained.Continuous Operation ClauseA lease covenant requiring the tenant to keep the business open and operating during specified hours for the lease term.Corporate GuaranteeA lease guarantee from the tenant's parent company, putting the parent's balance sheet behind the rent obligation.

Primary sources

Tax & 1031

IRS: Like-Kind Exchanges, Real Estate Tax Tips ↗IRS overview of Section 1031 like-kind exchange rules for real property.IRS Form 8824 (Like-Kind Exchanges) ↗The form and instructions used to report a 1031 exchange on your tax return.26 U.S.C. Section 1031 (Cornell LII) ↗Full statutory text of Internal Revenue Code Section 1031.Treasury Reg. 1.1031(k)-1 (Cornell LII) ↗Regulations on deferred exchanges, identification rules, and qualified intermediaries.Federation of Exchange Accommodators ↗Trade association of qualified intermediaries with consumer 1031 exchange education.

Franchise disclosures

FTC Franchise Rule ↗The federal rule requiring franchisors to provide a Franchise Disclosure Document.FTC Franchise Rule Compliance Guide ↗FTC's item-by-item guide to what each FDD section must contain.California DFPI Franchise Search (Docqnet) ↗Searchable database of franchise filings, including FDDs registered in California.Wisconsin DFI Franchise Search ↗Free search of franchise disclosure documents filed in Wisconsin.Minnesota CARDS (Commerce Actions and Regulatory Documents Search) ↗Minnesota Department of Commerce database with registered franchise FDDs.SBA Franchise Directory ↗List of franchise brands eligible for SBA-backed financing.

Filings

SEC EDGAR Full-Text Search ↗Search public company filings, including 10-Ks and 10-Qs of tenants and net lease REITs.

Credit

S&P Global Ratings ↗Corporate credit ratings and research used to judge tenant investment-grade status.Moody's Ratings ↗Moody's corporate credit ratings and research on retail and restaurant tenants.Fitch Ratings ↗Fitch credit ratings, a third major source for tenant and guarantor credit.

Net lease REITs

Realty Income Investor Relations ↗Filings and presentations from the largest net lease REIT, useful for market benchmarks.NNN REIT ↗Retail net lease REIT; investor materials report acquisition cap rates and tenant mix.Agree Realty ↗Net lease REIT focused on investment-grade retail tenants and ground leases.Essential Properties Realty Trust Investor Relations ↗Net lease REIT focused on middle-market service and experience tenants, with rent coverage disclosure.Four Corners Property Trust ↗Net lease REIT concentrated in restaurant and other service retail properties.W. P. Carey ↗Diversified net lease REIT active in industrial and international sale-leasebacks.

Associations

Nareit ↗REIT industry association with data, research, and REIT index performance.ICSC ↗Global retail real estate association and host of ICSC Las Vegas and regional deal-making events.International Franchise Association ↗Franchise industry association with research on franchise sectors and policy.ADISA ↗Trade association for alternative investments, including 1031 DST sponsors and distributors.CCIM Institute ↗Commercial real estate designation body offering investment analysis education.

Data

FRED: 10-Year Treasury Yield ↗Daily 10-year Treasury yield, a common benchmark for net lease cap rate spreads.U.S. Census Bureau Retail Trade ↗Monthly and annual U.S. retail sales data by category.BLS Consumer Price Index ↗Official CPI data, used for CPI-based rent escalation clauses.