Single-tenant net lease
NNN leased investments are generally leased to one single tenant and are thus referred to as STNLs or Single Tenant Net Leases. A NNN lease investment can however have two or more tenants, though it would not be considered an STNL investment. An example of this would be a Starbucks & MetroPCS which share a building under two separate NNN leases, or a retail strip center where all tenants are wrapped into one NNN lease. Both examples would be considered NNN leased investments; however they would not be STNLs. The risk of default is spread out over more than one tenant in such NNN deals (i.e. If either Starbucks or Metro PCS goes bankrupt, the other tenant continues to pay the rent due under their NNN lease). Such deals can appeal to investors seeking to spread risk, though the simplicity of collecting one rent check from one tenant is forfeited.
Double net lease
Another variation of the NNN lease is the NN lease or “Net-Net” lease which is pronounced “double net” where the “net” amounts generally are property tax and insurance. Double net leases, like triple net leases, are usually, though not always, single-tenant arrangements, however the landlord carries some extra financial maintenance obligation. Some of the Discount Dollar stores and Auto Parts dealers operate under double net leases, where the landlord is responsible for the roof and structure of the building. The term “Net Lease” is tossed around loosely in the net lease industry, often used when referring to a triple or double net lease; however there is a definite distinction between a triple net and a double net lease even though some brokers erroneously use the term “Net Lease” to describe both. Double net leased investments generally trade at a slightly higher CAP rate than triple net leased investments, because of the maintenance expenses which the landlord is responsible for. Brand new NN Deals with long-term builder warranties covering the roof and sometimes structure can be attractive to investors looking for a higher return.