Many of my friends, family and clients are suffering through this horrible economic downturn. If they own investment property, they may have lost tenants in apartments, offices or shopping centers, find that they are negotiating with rent reductions, or may be dealing with a difficult refinance. In the troubled capital markets of today, getting financing or a refinance is not easy – and the terms are not as favorable as they used to be.
But I have noted that, with a few exceptions, the NNN properties have fared relatively well. Yes, there are some problems, but in general and compared to the full spectrum of commercial real estate, most tenants are making their money rent payments as laid out in the lease, which are typically held up by a guarantor on the lease. And the guarantor is ideally a large company that can withstand the economy we are in now.
The two examples I know of personally were both smaller fast-good chains with a personal guarantee from a party that failed… in one case, the restaurant closed, in the other case, the owners found a new tenant and negotiated a new lease.
I have also noted that while many asset types that may be for sale now are deeply discounted, NNN properties have not moved drastically in sales prices. This little niche tends to – in general – hold. It always comes down to the tenant, their strength and sales, and location.
