NNN Lease - who pays for HVAC and CAPX?

Question

Hey guys,

what is common in a commercial NNN lease? Does tenant pay for it all including hvac and capx or are those two items + anything else "major", the landlords responsibility?

Thanks!

Joel Owens · Answer

Yes Tony a TRUE Triple Net the landlord will not pay those costs.

Lately net lease companies especially credit rated tenants have been more demanding in trying to get the landlord to cover some costs.

It is very important to look at the length of the lease and terms and escalations.With inflation if the rent increases every 5 years is marginal and they want you to take care of certain items with the property it can drastically reduce your returns.

It's all about what returns you are seeking versus the security and consistency of the payment.

Generally triple net will hover around the 6 to 9 CAP range but will not approach the teens in most situations.For those kind of returns you have to usually chase after value add deals but they are much more work than mail box money from a credit tenant.

Credit tenants have risk which is why you also research heavily  the health of the tenant today you are acquiring the lease and their growth plans for the future along with reserves.

Kyle Meyers · Answer

A true NNN lease would make those the tenants responsibility, but it is not too uncommon for capx to be the landlord's responsibility. Depends on what you can negotiate.

Tony Nguyen · Answer

great info Joel - thank you so much!

Tony Nguyen · Answer

very helpful - thanks for your input gentlemen!

Steven Hamilton II · Answer

Correct, the typical NNN lease has all expenses except for any mortgage payment are the tenants responsibility.

NNN Lease - who pays for HVAC and CAPX?

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