Single Tenant Development Equity Partners For Triple Net Lease Deals

by The Real Estate Buyers

in ,
Single Tenant Development Equity

Development of net lease properties may still be down from its peak of a few years ago, but it is coming back as retailers start to expand again.  The economy is at a point right now where corporate clients are looking to start growing again and are looking at new sites for expansion. This trend offers an opportunity for real estate developers who focus on single tenant development.

The most active retailers are Family Dollar and Dollar General, which are expected to build a combined 1,000 stores this year. Other retailers expanding include Big Lots, Auto Zone, Advanced Auto CVS & Walgreens.

Independent developers that specializes in triple net-lease single tenant properties and need money to build them now have new options for equity available. Having a consistent source of equity for developers is critical to keep projects moving forward and grow their businesses faster.

Typically a single tenant NNN developer has a construction lender that will lend 80% loan to cost, having a partner that can then provide all of the equity for the deal can streamline the development process. The big NNN developers take advantage of one or two institutional investors backing the equity in all their deals. The challenge for smaller single tenant developers is that the typical deal size may be too small to interest the institutional funds.

Net lease properties, buildings occupied by specific single tenants with long-term leases in place before construction begins, are highly desired by our partners looking for stable, low-risk investments.  Our partners focus solely on providing equity financing for net lease single-tenant properties as low as $500,000. The goal of our investors is to develop multi-year, multiple deal relationships with developers diversified by property type, tenant profile and geographical region.

If you are an independent developer of single tenant properties here are the typical criteria for determining a partnership candidate:

Property Characteristics:

  • Single tenant net lease development or re-development projects only
  • Property types include retail, restaurant, medical, industrial and office.
  • Projects may be located anywhere in the U.S. (the stronger the credit tenant and the longer the lease, the smaller the market).
  • Fully entitled, ready-to-start projects with minimal/identified environmental risk.

Investment Parameters:

  • Fund up to 100% of project’s equity, not to exceed 20% of project costs.
  • Minimum project budget per property: $500,000; maximum: $10 million.
  • Holding period: 1 to 1-1/2 years.
  • Funding to occur upon opening of construction loan and pulling permits.
  • Multiple deals with same tenant encouraged.
  • Investment structure is typically preferred equity or mezzanine debt.

Developer Characteristics:

  • Have a tenant relationship that ideally can expand to multiple projects
  • Have the construction and development expertise to handle the proposed project.
  • Ability to obtain a construction loan without any recourse
  • Have the financial wherewithal to handle cost overruns and penalties that may occur.

Tenant Requirements:

  • Investment-grade NNN tenants
  • Minimum lease term of 10 years.
  • Marketable lease format (NN considered if credit tenant)

Current Target Tenants:

  • Drug Store NNN Tenants: Walgreens CVS
  • Retail NNN Tenants: Family Dollar, Fred’s Grocery, Dollar General, Dollar Tree, Tractor Supply, Sherwin Williams, Staples
  • Grocery NNN Tenants: Gordon’s, Fresh and Easy, Smart and Final, Aldi’s
  • Restaurant NNN Tenants: Dunkin Donuts, Starbucks, McDonald’s, Del Taco, Whataburger, Wendy’s, Tim Horton’s, Yum Brands (Taco Bell, KFC), Roy Rogers, Jack in the Box, Sonic, Brinker Brands, Darden Brands, Panera Bread, Red Robin, BWW, Applebee’s, Chipotle, IHOP
  • Service NNN Tenants: Verizon, ATT, Most Large Banks
  • Medical NNN Tenants: Affordable Care, Divita, Fresenius
  • Auto NNN Tenants: Autozone, Advance Auto Parts, Bridgestone/Firestone, Discount Tire, Goodyear, O’Reilly’s, Tuffy’s

ATTENTION DEVELOPERS: If you are an independent developer who wants to do more deals make more money with less overhead and allow you to focus on what you do best, develop real estate then contact us. our real estate investment partners focus on providing equity capital for net lease development deals to be your go to equity source.

Related posts:

  1. Triple Net Lease Single Tenant Cap Rates (20)
  2. Triple Net Lease Tenants (13.6)
  3. Triple Net Lease Real Estate Investment (13.5)
  4. Triple Net Lease Restaurant Buyers (13.2)
  5. Triple Net Lease Investment Benefits (12.5)