The NNN Lease often called a triple net (NNN) lease, is considered a turnkey investment in the real estate industry. It comprises a fixed structure where the tenant of a commercial property is solely responsible for paying all (or most) of the operating expenses. Such qualifiers include building maintenance, insurance, and property taxes. Many investors seeking long-term, stable income streams, as well as potential graduation from mature portfolios, find this option desirable.
A triple net lease – as a single tenant property — can often produce 10 to 20-year lease agreements. Deemed low risk, this unique anomaly in an otherwise volatile market leverages predictable cash flows and valuations that are lower relative to apartment rentals. The gross cash yield on these properties can run up to 1.5 percent higher than apartments in the same geographic area. Free cash flow on such mortgages means investors aren’t relying on higher appreciation to generate discretionary returns.
With its alluring advantages, individuals and financial institutions are vying for shortlisted properties and simultaneously ballooning costs to unprecedented heights. Large industrial sites in northern New Jersey, for example, average nearly $1.8 million per acre. And prime new warehouse construction in this region equates to achieved, triple net lease rents of $11.50 per square foot .
High net-worth investors are especially attracted to single-tenant lease deals in the retail sector. These private and 1031 exchange buyers accounted for about two-thirds of single-tenant retail deals in 2017 .
Deciphering the Red Flags and Committing to the Right Deal
Before jumping into a long-term net lease, especially where your nest egg is concerned, check the following:
- Tenant’s past credit and payment history
- Tenant’s spending habits (delinquent or compliant)
- Any incursion of debt
- Location of property
- Property type (retail, industrial, mixed-use, office, warehouse)
- The size of the business (small or larger conglomerate)
- Price structure (comparable to similar properties)
- Weighing the advantages against your portfolio (long-range goals and expectations)
An Enclave for Retirement Plans
For the landlord or individual investor, a triple net lease is both low maintenance and consistently streamlined as far as anticipated revenue. As a liquid asset, this option permits quick cash transactions with little or no loss in value.
“A portfolio devoid of alternative assets is reliant on conventional stocks and bonds,” says Jeffrey Sica, president of Circle Squared Alternative Investments. “Real estate, especially long-term static leases, allows for diversification – engendering real assets and prolonged passive income over time.”
As a coveted income stream for retirement, U.S. News & World Report also praises the realty sector as a fierce competitor. “Since properties are physical assets, they will always be worth something whereas other investments can go all the way to zero.” 
Investors should be aware of additional risks associated with alternative investments due to factors such as economic and political instability, regulatory requirements, increased volatility, illiquidity, higher management fees, lack of performance history, currency fluctuation, and differences in auditing and other financial standards and that these risks can be accentuated in alternative investments. Alternative investments may be suitable only to those who understand and are willing to assume the economic, legal and other risks involved.
The foregoing is not a complete list of the risks involved with alternative investments. You should thoroughly review all pertinent offering documents with respect to alternative investments with your financial, legal and tax advisors to determine whether the investment is suitable for you in light of your investment objectives and financial circumstances.
Circle Squared Alternative Investments, LLC (“CSQ”) is an SEC registered investment adviser with its principal place of business in the State of New Jersey. Registration does not imply a certain level of skill or training. CSQ may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by CSQ with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration where the prospective client resides. For information pertaining to the registration status of CSQ, please contact CSQ or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). For additional information about CSQ, including fees and services, send for our disclosure statement as set forth on Form ADV from CSQ using the contact information herein. Please read the disclosure statement carefully before you invest or send money.
 (Burd, Real Estate NJ 2018)
 (Egan, National Real Estate Investor 2018)
 (Reeves, U.S. News & World Report 2018)