Net lease glossary
Fee Simple
Full ownership of both the land and the building, as opposed to owning only the land under a ground lease.
Fee simple ownership means the investor owns both the land and the improvements outright. In net lease, a fee simple deal lets the owner depreciate the building and typically carries a higher cap rate than a ground lease on the same tenant. The trade-off is that the owner bears the building's physical obsolescence and, depending on the lease, some capital costs. Comparing fee simple and ground lease pricing on similar tenants is a common underwriting exercise.