Beginning in 1998 and continuing to the present, Coulter Adams has managed a real estate portfolio consisting of commercial, industrial, and R & D properties in California, Idaho, Iowa, Utah, and North Carolina. In addition to the above, the portfolio held title to a 120 unit multi-family apartment complex for which Coulter was the Managing Director. As Managing Partner for the firm Coulter Adams has worked with such tenants as Wells Fargo Bank, Hewlett-Packard, Applied Materials, SCP Global Technologies, FedEx, Roche Biomedical, MCI, GAF, and Xpedx. In this role Coulter has been responsible for strategic investment planning, budget forecasting, calculating rates of return, and the negotiation of refinancing and and re-leasing. As Managing Partner Coulter also was responsible for the coordination of  all tenant improvements.

Beginning in 1996 Coulter has acted in the role of  buyers’ representative in the purchase of numerous single tenant triple net leased properties throughout the U.S.  As such Coulter assisted in locating and the closing of over $32M of properties in Rhode Island, New York, N. Carolina, Michigan, Texas, Colorado, Washington, and California. In negotiating these transactions Coulter was presented with the opportunity to negotiate with such tenants as Walgreens, FedEx, Blockbuster Video, Ace Hardware, Dollar General, and Verizon Wireless. In many of these purchases Coulter was asked by the buyer to prepare cash flow projections, perform site inspections, and to coordinate all due diligence work. 

What is a Triple Net Leased Investment?

A Triple Net Lease is sometimes described as a Net/Net/Net lease, an Absolute Net lease, or a NNN lease. The term refers to a lease agreement wherein the tenant or lessee, agrees to pay in addition to the base rent, real estate taxes, maintenance, insurance, utilities, landscaping maintenance, as well as being responsible for all costs associated with maintenance of the structure of the building as well as parking lot, if any. In a Triple Net Lease rents on a per sq. ft. basis, are typically lower than a standard “gross rent” lease. In a gross rent lease the tenant typically pays a base rent and often, common area maintenance fees only. This leaves the landlord obligated for all operating costs, including taxes, maintenance, management, utilities etc.
NNN leased properties are most often single-tenant commercial, industrial or office properties with long term leases and often backed by the parent company or corporation. Commercial properties of this type are frequently leased to national or regional retailers such as Walgreen’s Drugstores, CVS Drugstores, Wal-Mart, Safeway, Family Dollar, Home Depot, Verizon Wireless, Costco, and FedEx. Leases are most often for a minimum of 10 years and are often for 20 years or more. When contemplating an investment of this sort the main derivative of value is not so much the real estate itself but instead the uninterrupted cash flow created by what’s often an referred to as an “investment grade” tenant. In these uncertain times the proper selection of a property is all that more critical. It is becoming apparent that “value” retailers like Wal-Mart, Costco, Family Dollar, and Dollar General are succeeding where other may fail. In addition, it’s generally agreed that healthcare related retailers like Walgreens, Rite Aid, and CVS Drugstores are likely to be in position to take advantage of the needs of the expanding segment of the aging population.

In addition to NNN leases there are what’s known as Modified NNN leases , also known as Double Net or NN leases. These sort of leases transfer most but not all, the financial responsibility to the tenant. Most NN or modified NNN leases obligate the landlord to maintain the roof and or exterior walls of the property. All other costs are conveyed to the tenant. Anything less than a Double Net (NN) lease requires even more of the maintenance to be paid by the landlord. In short, a NNN lease can be a desirable investment for a real estate investor as the shifting of management and operational expenses to the lessee dramatically decreases those expenses and efforts normally incurred by the property owner while at the same time ensuring the investor a stable long-term income stream.

Why don’t most corporations own their own buildings?

It’s probably the question I’m asked most frequently. The primary reason is that for these companies to invest what would be significant amounts of capital in real estate assets simply do not make good business sense. If FedEx, Walgreens, Starbucks, or any of the other nationally recognized companies owned the thousands of locations they occupy their balance sheets would be weighed disproportionately with real estate. In doing so they’d be required to take on significant amounts of debt and would be committing capital that could otherwise be used to expand their “core” businesses. Additional considerations include their ability to: (a) write off 100% of the rent as a cost of operations, and (b) remain fluid in their business strategies by not having to buy and sell properties as their business needs change and markets evolve.

What about Financing?

In this economic climate the securing of financing is somewhat more challenging.  Lenders however are currently loaning up to 60% of the value of a property at very attractive rates, assuming the borrowers credit it good. Loan rates are typically fixed for a period of 10 years with an amortization period of between 20-30 years. Given this fact Cash-on-Cash returns of 7.25% and up are achievable.