Triple Net-Leased Investments

Written by Jordan on . Posted in Blog

“Triple Net Leased” is a term that is thrown around a lot in the real estate world.  This article will define this term, and discuss the benefits of owning such properties.

First, I will need to define some real estate lingo.
Many commercial leasing terms exist to describe who pays the property’s expenses.  Who pays which, and how much, of those expenses is all spelled out in a tenant’s lease agreement.  Three ways to describe commercial leases are:

1. Gross lease, 2. Modified Gross (or Net) Lease and 3. Triple Net (or NNN) Lease.
A gross lease is the easiest to understand.  Under this lease, a tenant pays rent only, and the landlord pays for all utility bills, insurance, and property taxes.  A modified gross, (sometimes called a “Net”) lease is one where a tenant will pay some expenses.  For example, an apartment building that has electricity separately metered to the units is charging modified gross rents.  Tenants pay their electricity bills, while the landlord pays everything else.  (Water, gas, sewage, garbage, maintenance, and insurance – to name a few.)  Triple Net describes leases where the tenant pays all of the expenses previously mentioned.  In fact, the name “triple net” is an abbreviation for the term “Net taxes, Net insurance, Net maintenance.”  Note that the term “double net” is sometimes used to describe leases.  This means that the landlord, not the tenant, is paying one of these bills.
I could write an entire article on the differences between commercial leases, but this article focuses on properties that are triple net leased to credit tenants, so I will focus on that topic.  The previous summary will have to do for now.

Diversify Your Real Estate

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Are all Your Eggs in One Basket?  Diversify Your Real Estate – Within Real Estate

By Chris Miller

Who is doing the best in this slow economy? Whose investments are performing the best in this environment?
The portfolios of real estate investors who have learned to diversify are.  Every several years, an economic downturn like our current situation hits – as it did at the beginning of this decade, as in the early 1990’s, etc.  Once we climb out of our current situation, another one will come along in several years.  Smart investors, like those that I advise, have learned by watching these cycles – and know the value of diversity.  This article will discuss diversifying within your real estate portfolio.

So – I don’t need to trade my real estate for stocks, bonds, or gold?
Heavens, no!  If you had sold half your real estate and put it into the stock market in 2005, where would you be now?  Many of my investors are comfortable with real estate because they understand it, it can yield excellent cash flow with tax advantages, and because property allows investors to use the power of leverage (through loans).

Adding Style to your Stock Investment Strategy

Written by Jordan on . Posted in Blog

If you’re just getting your feet wet in the world of investing, stocks may seem to be the best way to get started. While financial advisors will likely suggest that a certain portion of your portfolio contain stocks, it is important to realize that there are two primary styles of stock investing — value and growth.

At any given time, one style or the other may be the best bet for you.  Oddly enough, at times you may even be better off employing both styles. Even if you start off with one style, changes in your lifestyle or the market may lead you to make a switch to the other or use both styles at once.

Lease Options for Commercial Landlords

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By Nate Bernstein, Esq.
We are all aware that at the end of a lease term, a commercial tenant frequently wants to extend the term of their stay based on rights pursuant to a lease option.  A tenant may have built a successful business at the location with a loyal customer base, and has developed “goodwill” that may be lost if the tenant has to move to a different location.  Tenants guard lease options like a treasure chest.  The question is whether the option terms will be enforceable.

A commercial landlord who agrees to an option to renew or extend the lease will generally require the tenant to pay a higher amount of rent during the extended lease term.   This is consistent with factors such as inflation, and increased business costs of the landlord.  The tenant wants to have no increase or a very nominal increase.  The tenant may argue that since the leasing market has collapsed due to the poor local and national economy, that an increase is not warranted.  The fact of the matter is that commercial landlords can protect themselves from leasing market downturns by specific language in the option agreement that will assure rent option increases based on a specific standards and methods of calculation.

Insurance Tips for Building and Remodeling

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By Eric Paulos

Whether you remodel, make structural changes to an existing building, or take the plunge to develop a residential building from the ground up, there are several important insurance considerations:

The standard commercial building insurance policy will not adequately cover the construction operations. Standard package property and liability insurance policies for commercial buildings are designed for your normal day to day leasing and ownership operations. There are many exclusions within policies and many insurance companies will refuse to provide standard coverage for commercial buildings where it is known that remodeling or construction is about to occur.

The Significance of Charging CAM Fees

Written by Jordan on . Posted in Blog

Commercial Real Estate investing is undoubtedly an acquired intelligence that often takes years of experience to understand. Most commercial investors will quickly admit the right property can yield progressive long-term returns but one must properly assess the multitude of variables associated with the investment. One important variable that is often miscalculated in determining the return on your commercial building is properly allotting C.A.M. (Common Area Maintenance a.k.a. Triple Net Charges) to your commercial tenants. This article will hopefully help each investor to realize the importance of such charges and assist in properly negotiating such charges into your next lease.

Exclusively Yours…

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When your commercial shopping center tenant wants marriage yet you still want to see other tenants!

I once heard someone use the comparison that Commercial Leases are similar to marriages. This may be true if your pre-nuptial agreement involves a set term, hours of negotiating, and enough legal jargon to ensure your attorney heads for an early retirement.

In negotiating any Lease it is imperative to know the consequential effects of each clause that is being requested or permitted. One such very important clause which is often under analyzed is the Exclusive clause (a.k.a. exclusivity clause).

Legal Corner – February 2009

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Here is some questions and answers by one of our legal writers, Stephen C. Duringer. It is written specifically for issues that face commercial property owners, so we hope you can find benefit from his advice. We hope to continue to blog additional intelligent and relevant content in the future.

Question
I am about to enter into a five year term lease for an industrial unit in Southern California. The unit has been vacant several months and I don’t want to lose this deal, seems like good tenants are kind of few and far between lately. We’ve agreed on just about all of the deal points except a couple. At the last minute the tenant requested the lease be prepared with a subsidiary of his company rather than the parent company, saying it’s for ‘tax reasons.’ Additionally, he wants to make the use provision extremely broad rather than specific allowing him to do just about anything in the premises without having to get my permission. He knows I need to lease the space, but I’m not sure I want to give in on these points, what are my options?

Commercial Property Management

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We are pleased to announce that our premier issue is about to go to print. Next month, February 2009, Apartment News Publications will release the first issue of Commercial Property Management.

Commercial Property Management Magazines will be released first in Western Los Angeles. We are excited that we can release a commercial property magazine in such a big market, where the commercial industry is continually developing and the rest of the nation looks to first. We hope that in this economic crunch, our editorials can point out ways to push innovation and expansion, and that our advertisers will offer their money-saving services that help you cut your costs.

If you are interested in advertising, make sure you call us at (714) 893-3971 to speak to an Account Executive.

If you are interested in receiving our magazine, email me at js@buildingssocal.com to start receiving Commercial Property Management.

Introducing Commercial Property Management Magazine

Written by Buildings Maintenance & Management Magazine on . Posted in Blog

We are pleased to introduce our newest publication, “Commercial Property Management Magazine”. You’ll find the magazine continues the same mix of feature articles and vendor advertisments that has driven the success of “Apartment Management Magazine” over the years.

We are just getting started – so keep a close eye on this website!