Investment Grade NNN
Real estate investment is not for the 'faint of heart' or the undercapitalized investor. There are identifiable and predictable cycles in the economy and various real estate sub-market issues depending on location and "asset class". With these factors in mind, there is an investment niche of net leased assets or NNN properties which fulfill a special role in every investor's portfolio; and play an even more important role in IRC 1031 Exchanges where your investment focus is often on wealth preservation in a risk-averse manner. Consider that you may have just sold an asset which took years of work and skill to create its market value. Do you really want to start all over a gain in that cycle or do you want to savor your success, even just a little by exchanging into a less management intensive NNN property? Further, in a market like the present one, what level of market risk, do you want to take on? Do you want to risk squandering the profits that you just accumulated in this last cycle in a less secure investment vehicle at the low current market cap rates?
Many commercial properties that are advertised to the investment public are referred to as net leased properties or NNN assets. But, not all NNN assets are equal and the differences are worth noting for your review.
Credit ratings are under review with the recent sub-prime mortgage issues that is understandable, at present. Nonetheless, based on a well-regarded and researched study by Moody's Rating Agency, net leased assets which have an investment grade (BBB or better) have a probability of default on their corporate bonds of approximately 3.8% over a twenty (20) year holding period. Non-investment grade or speculative grade tenants have a probability of approximately 38% default over the same period. There really is significantly more risk with a tenant (corporation) whose credit rating is less than investment grade. They could be a well-marketed or branded company; but there is more inherent risk in their operations for a bond investors or landlord than generally or previously acknowledged. So, investors beware. We have chosen to specialize in these investment grade tenant assets because they do provide an additional measure of income stability that serves our clients well in a changing real estate environment. Please contact us to review, in detail, our lists of both, investment grade and speculative grade tenants, each offer different investment opportunities.
We use the full range of ratings agencies, Standard & Poor's, Moody's, Fitch and NAICS (National Association of Insurance Carriers) as reference points for our reviews on behalf of clients in this regard.