Triple Net Lease (NNN)

A triple net lease — often shortened to an “NNN lease” — is a commercial lease structure in which the tenant pays not just base rent but also the property’s three major operating costs: real estate taxes, building insurance, and common-area maintenance (the “three nets”). On a $2,000,000 single-tenant retail property leased at $140,000 in annual base rent, the landlord nets close to that full $140,000; the tenant separately pays the roughly $18,000 in property taxes, $4,000 in insurance, and $6,000 in CAM that a landlord under a gross lease would otherwise fund out of that same rent check. That allocation of who pays operating costs — not the rent figure itself — is the practical triple net lease meaning borrowers should focus on when comparing a net-leased deal to a conventional one.

Ask a CRE lender what a triple net lease is worth in underwriting terms and the answer is usually one word: predictability. NNN structures dominate single-tenant retail (pharmacies, dollar stores, quick-service restaurants), industrial distribution, and most net-lease sale-leaseback deals, and lenders favor them because tenant-absorbed operating costs make NOI far more stable than a comparable gross-leased asset’s. Banks and life companies underwriting a credit-tenant NNN deal will sometimes stretch to 70%–75% LTV where a similar multi-tenant gross-leased property tops out closer to 65%, but only if the lease term is coterminous with — or longer than — the loan term; a lease rolling before the loan matures raises rollover risk that shows up as reduced proceeds or a mandatory cash-flow sweep. Borrowers negotiating a sale-leaseback or refinancing a net-leased asset should treat the lease’s remaining term, not just the tenant’s credit rating, as the number that moves the quote.

Lease structure and remaining term are exactly the kind of qualifier that gets lost in a generic rate quote, which is why we log them alongside LTV and DSCR whenever a lender in our coverage specifies an appetite for net-leased product in its observed lending terms.