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    Brisky Net Lease Continues Growth, Expands to California

    Brisky Solidifies West Coast Presence with LA Expansion

    MINNEAPOLIS, Minn. (February 19, 2024) – Today, commercial real estate firm Brisky Net Lease (Brisky) announced plans to expand by adding a regional office in Los Angeles, California. The firm specializes in triple net lease (NNN) transactions and other forms of investment real estate across the United States.

    Brisky identified Los Angeles as a critical market early in the firm’s targeted growth plan. The Los Angeles team is led by Brisky’s VP of Strategy, Michael Palffy, who spearheads strategic initiatives for Brisky Net Lease’s expansion and recruiting efforts. Palffy is joined by four talented brokers who will be introduced in the days to follow.

    “As Brisky Net Lease continues its thoughtful expansion, Los Angeles made obvious sense. The net lease broker talent pool, coupled with a massive investor network will undoubtedly add value to our clients and propel additional growth, said Brian Brisky, Founder and President. Additional markets are planned, but this will be a major hub for Brisky’s full-service investment sales platform.”

    Founded in 2010 by Brian Brisky, Brisky is known for excellent client service, transparent communication, and determined results for large institutions, private groups, and individual investors. With more than 90 percent of their transactions coming from repeat clients, Brisky achieved steady results in 2023 during a changing market and looks forward to continued growth in 2024.

    About Brisky Net Lease

    Brisky Net Lease is a commercial real estate brokerage that provides full-scale buyer and seller representation on real estate and triple-net lease properties nationwide. Brisky Net Lease is based in Minneapolis with another regional office in Charlotte. For more information, please contact us at info@brisky.com or 612-413-4200.

    Modernization of QSR: Transforming the Triple Net Industry

    Quick Service Restaurants (QSRs) are at the forefront of change in the Triple Net industry, reshaping the landscape and setting new trends in commercial real estate. In this article, we’ll delve into how QSRs are revolutionizing the Triple Net Lease sector and explore the changes that are still on the horizon.

    The Evolution of QSR

     
    Quick Service Restaurants (QSRs), commonly known as fast-food chains, have undergone a significant transformation in recent years. They have moved beyond traditional norms, adopting innovative strategies to meet the evolving demands of consumers. The traditional QSR meaning is expanding to include enhanced customer experiences, advanced technology integration, and sustainable practices. These adaptations are not only changing the way we dine but also impacting the commercial real estate (CRE) and triple net lease (NNN) landscape. Here’s a closer look at some of the key QSR industry trends that are having a profound impact on the Triple Net Lease landscape.

    Sustainability and Eco-Friendly Initiatives

     
    In the evolving landscape of Quick Service Restaurants (QSRs), sustainability and eco-friendly initiatives have become pivotal components. Modern QSRs are reshaping their practices to align with environmental consciousness. This includes sourcing local and organic ingredients, adopting eco-friendly packaging, implementing energy-efficient technologies, and reducing waste through recycling programs. By incorporating renewable energy sources and educating customers about their sustainability efforts, QSRs are not only appealing to eco-conscious consumers but also enhancing operational efficiency.

    For Triple Net landlords, having QSR tenants actively engaged in these initiatives translates to a positive public image, potential cost savings, and increased attractiveness of the property. As sustainability becomes ingrained in the QSR industry, the triple net landscape stands to gain from the positive impact of these environmentally friendly practices.

    Adapting to the On-the-Go Lifestyle

     

    Modernization of QSR | Automation and Technology Integration

     

    The modernization of QSRs is also catering to the on-the-go lifestyle of consumers. With the rise of delivery services and drive-thru options, QSRs are enhancing their accessibility and convenience. Mobile ordering, curbside pickup, and efficient drive-thru experiences are becoming integral parts of the QSR landscape, ensuring that customers can enjoy their favorite meals with minimal effort.

    For Triple Net landlords, these adaptations can result in increased foot traffic and sales for their QSR tenants. The ability to provide diverse and convenient service options can make a QSR a more attractive tenant, enhancing the overall value of the leased property.

    Health-Conscious Trends

     

    Health-conscious trends are reshaping the landscape of Quick Service Restaurants (QSRs) as consumers increasingly prioritize wellness in their dining choices. Modern QSRs are adapting by offering healthier menu options, incorporating nutritional information into their offerings, and sourcing high-quality, nutritious ingredients. From salads and lean protein alternatives to plant-based and gluten-free options, QSRs are providing a broader range of choices that cater to diverse dietary preferences. Some establishments are even leveraging technology to offer customized and personalized menu selections, meeting the individual health needs of their customers.

    For Triple Net landlords, embracing health-conscious trends in QSRs can lead to increased foot traffic and sales, as these establishments attract health-conscious consumers seeking convenient yet nutritious dining options. The alignment with wellness trends also enhances the overall image of the property, potentially attracting a broader customer base and contributing to the long-term success of the tenant-landlord relationship.

    Commercial Properties: A Smart Investment Opportunity

    Investing in commercial properties presents an excellent opportunity for generating passive income and establishing long-term wealth. To optimize your returns, it’s crucial to select the right investment opportunity. One effective strategy is to explore commercial properties featuring NNN leases.

    What is an NNN Lease?

    NNN leases, also known as triple net leases, are a type of lease agreement in which the tenant is responsible for paying all property taxes, property insurance, and maintenance costs, in addition to a predetermined monthly base rent. This makes NNN leases a very attractive investment option for commercial real estate investors, as they offer a predictable and steady income stream with minimal risk and responsibility.

    Benefits of Investing in Commercial Properties with NNN Leases

    There are several reasons why commercial properties with NNN leases are a smart investment:

    • Stable Income Stream: NNN leases typically place the responsibility for property expenses on the tenant, including taxes, insurance, and maintenance. This results in a predictable and consistent income stream for the property owner. 
    • Risk Mitigation: NNN leases are usually appealing to national and well-established tenants with strong credit. This minimizes the risk of tenant default and ensures reliable rental payments. NNN leases can also help protect property owners from unexpected financial burdens, such as rising property taxes or repair costs. Additionally, NNN leases often come with longer lease terms, providing greater stability and reducing turnover. This stability is advantageous for investors looking for a reliable income source over an extended period.
    • Tax Benefits: NNN lease investments offer the potential for tax deferral through the use of 1031 and 1033 Tax-Deferred Exchange Codes.
      • Defer capital gains taxes: Investors can defer capital gains taxes on the sale of an investment property until they sell the replacement property. This can give investors more time to invest the capital gains and grow their wealth.
      • Maintain investment momentum: Investors can use 1031 and 1033 exchanges to maintain their investment momentum and avoid selling one property before buying another.
      • Diversify their portfolio: Investors can use 1031 and 1033 exchanges to diversify their portfolio by exchanging one type of property for another, or by exchanging a property in one location for a property in another location.
    • Inflation Protection: Rental income in NNN leases is typically tied to periodic rent increases, often based on the Consumer Price Index (CPI) or other inflation metrics. This can help investors maintain the purchasing power of their rental income over time.

     

    As with any investment, it’s essential to thoroughly research potential properties, assess the terms of the NNN lease, and consider your investment objectives and risk tolerance before committing to this type of real estate investment.

    Types of Commercial Properties That Typically Have NNN Leases

    Triple Net Leases are commonly associated with a variety of commercial properties, particularly those that involve long-term, stable income streams. Some of the types of commercial properties that typically have NNN leases include:

    • Retail Properties: Both single-tenant and multi-tenant properties with a variety of retail tenants, such as grocery stores, department stores, shopping malls, and strip malls.
    • Office Buildings: Both Class A and Class B office buildings, as well as medical office buildings and other specialized office buildings.
    • Industrial Properties: Warehouses, manufacturing facilities, distribution centers, and other industrial buildings.
    • Quick-Service Restaurants (QSRs) and Casual Dining Restaurants: Popular restaurant chains, such as McDonald’s, Starbucks, and Chipotle.
    • Pharmacies: Both national pharmacy chains, such as CVS and Walgreens, as well as independent pharmacies.
    • Banks: Both national banks, such as Chase and Bank of America, as well as regional and community banks.
    • Gas Stations and Convenience Stores: Both national chains, such as ExxonMobil and 7-Eleven, as well as independent gas stations and convenience stores.
    • Other Commercial Properties: Other types of commercial properties that may have NNN leases include hotels, fitness centers, and self-storage facilities. NNN leases are also often used for properties that are leased to government entities, such as post offices and courthouses.

     

    NNN leases can be an attractive option for both landlords and tenants. For landlords, NNN leases provide a predictable and consistent income stream, while minimizing the risk of financial burdens from unexpected property expenses. For tenants, NNN leases can offer lower rental rates and the flexibility to control their own property expenses.

    Factors to Keep in Mind When Looking for Commercial Properties 

     

    Factors to Keep in Mind When Looking for Commercial Properties 

     

    When searching for commercial properties there are a few key factors to keep in mind:

    • Tenant Selection: It is important to choose tenants with a strong financial standing and a good credit rating. This will help to ensure that you receive your rent payments on time and in full.
    • Lease Term: Longer lease terms are more valuable, as they reduce the risk of tenant non-renewal.
    • Rent Bumps: Choose properties with periodic rent adjustments to ensure that your income stream keeps up with inflation.
    • Location: Select properties in areas with strong demographics, high growth potential and good underlying real estate. This will help to increase the value of your property over time and make it more desirable to a new tenant if the current tenant were to leave.
    • Guarantee: Oftentimes NNN leases include a guarantee from the tenant, but they can vary from personal to corporate so understanding the strength of the guarantee is important.

     

    Financing NNN Lease Commercial Properties

    There are a variety of financing options available for investors who are interested in purchasing commercial properties Some of the most common options include:

    • Traditional Commercial Mortgages: These mortgages are typically offered by banks and other financial institutions.
    • Hard Money Loans: Hard money loans are private loans that are typically offered at a higher interest rate than traditional commercial mortgages. However, they can be a good option for investors who need to close quickly or who have difficulty qualifying for a traditional mortgage.
    • Private Equity: Private equity firms can provide financing for large commercial real estate investments.
    • 1031 Exchange: Proceeds from another property can be used for the purchase of a new investment property using a 1031 exchange, which can defer capital gains taxes.

     

    Additional Tips for Investing in Commercial Property for Sale with NNN Leases

    • Work with a qualified commercial real estate broker who can help you find suitable properties and negotiate the best possible terms.
    • Get the property inspected by a qualified professional before you purchase it to identify any potential problems.
    • Purchase adequate insurance coverage to protect your investment.

    Netflix’s Brick-and-Mortar Expansion in 2025

    In a remarkable twist, Netflix, the trailblazing streaming service, is poised to venture into the brick-and-mortar world in 2025, creating a buzz within the commercial real estate industry and sending shockwaves through the entertainment landscape. 

    Reimagining the Entertainment Experience

     

    The Netflix House concept is designed to offer consumers a unique and immersive experience that transcends the traditional movie-going experience. These establishments will feature themed restaurants, interactive activities, and merchandise inspired by Netflix’s most beloved original content. Visitors will be able to step into the worlds of their favorite shows, such as “Stranger Things,” “The Witcher,” and “Bridgerton,” and experience these stories in a whole new way.

    The Netflix House concept is also a strategic move to diversify Netflix’s business model and reduce its reliance on streaming subscriptions. By creating a physical presence in the real world, Netflix can reach new audiences and generate additional revenue streams. This expansion could also help to strengthen Netflix’s brand and deepen its connection with its fans.

    Impact on the Entertainment Industry

     

    Netflix’s expansion into physical locations is likely to have a significant impact on the entertainment industry. It could lead to a new wave of immersive entertainment experiences that blend the digital and physical worlds. It could also force other entertainment companies to rethink their business models and find new ways to engage with their audiences.

    For example, traditional movie theaters may need to adapt to the changing landscape by offering more unique and interactive experiences. Theme parks and other entertainment venues may also need to find ways to incorporate digital technology into their attractions.

    Overall, Netflix’s move into brick-and-mortar is a bold and innovative one that has the potential to revolutionize the entertainment industry. It is a testament to Netflix’s commitment to innovation and its desire to provide its customers with the best possible entertainment experience.

     

     

    A Testament to Netflix’s Commitment

     

    Netflix’s strategic move underscores their unwavering dedication to pioneering new ideas and its aspiration to deliver an unparalleled entertainment journey to its loyal customer base. This latest venture into the realm of physical retail establishments represents a daring and forward-thinking step that carries the potential to reshape the landscape of the entertainment sector.

    It remains to be seen how Netflix’s brick-and-mortar expansion will ultimately play out. However, it is clear that this is a significant development for the entertainment industry. Netflix’s decision to open physical stores is a sign of the company’s ambition and its desire to remain at the forefront of the entertainment industry’s evolution.

    Buffalo Wild Wings: An Attractive Net Lease Investment

    Buffalo Wild Wings is one of the most successful sports bar chains in the United States, with over 1,200 locations nationwide and sales of over $3.9 billion in 2022. Often abbreviated as B-Dubs, the popular sports bar and restaurant chain is known for its signature chicken wings and wide selection of sauces. Founded in 1982, Buffalo Wild Wings has since become a go-to destination for sports enthusiasts, families, and friends looking for a casual dining experience combined with a lively atmosphere to watch sports events.

    Buffalo Wild Wings has experienced significant growth over the years, expanding its footprint across the United States and internationally. It has had a notable influence on the casual dining and sports bar industry, setting the standard for combining food, sports, and entertainment in a fun and welcoming environment. The casual dining chain has been recognized by Entrepreneur as a Franchise 500 brand Top Food Franchise for 2021. 

    Financial Success

     

    • Sales growth: Buffalo Wild Wings has experienced consistent sales growth over the past several years. In 2022, the chain’s sales grew by 5.9% over 2021.
    • Profitability: Buffalo Wild Wings is a profitable business. In 2022, the chain’s net income was $300 million.
    • Return on investment: Buffalo Wild Wings has a strong return on investment (ROI). In 2022, the chain’s ROI was 20%.

     

    Triple Net Lease Success

     

    • NNN lease savings: Buffalo Wild Wings estimates that its NNN leases save the chain over $100 million per year. This estimate is based on the fact that NNN leases transfer the burden of owning the real estate to the landlord. This allows Buffalo Wild Wings to focus on its core business of running restaurants.
    • NNN lease flexibility: Buffalo Wild Wings’ NNN leases give the chain flexibility to expand or contract its operations as needed. Because the chain is not responsible for the financing of the properties, this allows Buffalo Wild Wings to move into new markets or close underperforming restaurants more easily. 

     

     

     

     

     

     

     

     

    Buffalo Wild Wings has experienced consistent sales growth and profitability over the past ten years and more.

    A Triple Net Lease Partner 

     

    Brisky Net Lease is a good partner for investors looking for triple net lease properties. Brisky Net Lease has a team of experienced professionals who can help investors to find the best possible NNN lease deals to complement their existing commercial real estate portfolios.

    Evaluating Triple Net Lease Investments for Maximum ROI

    Commercial real estate remains a sought-after avenue for investors seeking reliable income streams and low-maintenance opportunities. Among the various options available, Triple Net Lease investments stand out for their investor-friendly structure. In an NNN lease, tenants shoulder not only the rent but also all operating expenses, including property taxes, insurance, and maintenance, making it a hands-off investment for landlords.

    Evaluating NNN Leases

     

    To make the most of your NNN investment, it’s essential to consider several key factors:

    1. Net Lease Payment

    The net lease payment, which is the rent paid by the tenant minus operating expenses, serves as the bedrock of your NNN investment. Ensuring that the net lease payment offers a competitive return on your investment is vital for maximizing ROI.

    2. Operating Expenses

    Delve into the property’s operating expenses. Are they reasonable and sustainable? Balancing operating expenses is crucial, as high costs can erode your profits over time.

    3. Rent Rates

    Comparing the property’s rent rates with similar properties in the area is crucial. Competitive rent rates play a pivotal role in attracting and retaining tenants, ultimately bolstering your ROI.

    4. Tenant Retention Rates

    High tenant retention rates indicate a stable investment. Investigate the property’s tenant history and assess how property management approaches tenant satisfaction.

    5. Lease Terms

    Thoroughly scrutinize the lease terms. Longer lease terms offer stability, but also consider the potential for rent escalations to keep pace with inflation.

    6. Cap Rate

    The capitalization rate (cap rate) is a critical metric in commercial real estate. It measures the ratio between the property’s net operating income (NOI) and its current market value. While a higher cap rate generally signifies a greater potential ROI, remember that other factors, such as tenant quality, lease terms, and market conditions, also come into play.

    7. Net Operating Income (NOI)

    NOI represents the income generated from the property after deducting all operating expenses but before considering debt service or taxes. A robust NOI is fundamental for ensuring a healthy cash flow.

    8. Cash Flow

    Positive cash flow is the lifeblood of real estate investments. Verify that the property generates sufficient income to cover all expenses while leaving room for profit.

    9. Capital Expenditures

    Consider potential capital expenditures, like roof repairs or HVAC upgrades. These costs can significantly affect ROI, so incorporate them into your evaluation.

    10. Property Management

    Evaluate the quality of property management. Effective management can enhance tenant retention rates and minimize operational issues, contributing to a more stable and profitable investment.

    11. Investment Portfolio

    Investment PortfolioAssess how a Triple Net Lease investment fits into your broader investment portfolio. Diversification is key to managing risk effectively. Note that NNN investments can be owned by individuals, partnerships, and various entities, not exclusively associated with Real Estate Investment Trusts (REITs).

    In addition to retail Single Tenant Net Lease (STNL) properties, it’s essential to recognize that NNN investments encompass a wider range, including multi-tenant retail, office, and industrial properties. Therefore, you have the opportunity to diversify your real estate portfolio beyond the retail segment.

    Securing Your NNN Success

    Evaluating Triple Net Lease investments for maximum ROI involves careful consideration of net lease payments, operating expenses, rent rates, tenant retention rates, lease terms, cap rates, NOI, cash flow, capital expenditures, property management, and its place in your overall investment portfolio. By focusing on these key factors and remaining mindful of the broader NNN investment landscape, you can build a diversified real estate portfolio that generates a steady and reliable income stream.

    Adapting Casual Dining to Evolving Consumer Dining Habits

    Casual dining has long been a staple of the foodservice industry, offering a relaxed yet enjoyable dining experience. However, as consumer dining habits evolve, so must the casual dining landscape. This article explores the dynamic changes and adaptations within casual dining restaurants, highlighting how brands are successfully catering to the shifting preferences of modern diners.

    Consumer Dining Habits: The Driving Force of Change

    The world of casual dining is undergoing a significant transformation, driven by shifting consumer behavior and evolving societal trends. In an era of rapid technological advancement, changing preferences and heightened awareness of health and sustainability, restaurants are being forced to adapt in order to remain relevant and appeal to a new generation of diners.

    Adapting Casual Dining: Healthier Menus and Sustainable Practices

     

    Casual Dining - Evolving Consumer Dining Habits

     

    Health-consciousness and environmental awareness are driving changes in consumer behavior. Casual dining restaurants are responding by incorporating healthier ingredients and cooking methods into their menus. Locally-sourced, organic, and sustainably-produced ingredients are gaining prominence, as consumers seek out options that align with their values.

    Moreover, restaurants are making efforts to reduce food waste by implementing sustainable practices such as composting, using biodegradable packaging, and minimizing portion sizes. These initiatives not only resonate with environmentally-conscious consumers but also contribute to cost savings for the restaurant

    Industry Leaders Setting the Bar: Noteworthy Initiatives in Casual Dining

    For example, Chipotle Mexican Grill is known for its commitment to using locally sourced ingredients. The company has been praised for its sustainable practices and its focus on healthy eating. 

    Another example is The Cheesecake Factory, which is known for its wide variety of menu items. The company has over 200 items on its menu, including appetizers, salads, pasta dishes, seafood, steak, and desserts. This allows diners to find something to their liking, regardless of their dietary restrictions or preferences.

    Casual Dining Restaurants: Embracing Innovative Concepts

    To meet evolving demands, casual dining restaurants are embracing innovative concepts. From pop-up collaborations with local chefs to immersive dining experiences, these establishments are finding creative ways to engage their patrons beyond the standard dine-in model.

    For instance, some restaurants are offering virtual cooking classes or hosting live music events. Others are creating interactive dining experiences, such as allowing diners to build their own pizzas or salads. These innovative concepts help to create a more memorable and engaging dining experience for customers.

    Food Service Industry Trends: Technology Integration

    Technology is playing a pivotal role in reshaping the casual dining landscape. From online ordering platforms to digital menus and contactless payment options, brands are leveraging technology to enhance the dining experience and provide a seamless process for customers.

    Foodservice Industry Trends: Technology Integration

     

    Many casual dining restaurants now offer online ordering and delivery services. This allows customers to order food from the comfort of their own homes, without having to wait in line or worry about parking. Additionally, many restaurants are using digital menus to provide customers with more information about the food they are ordering. This can help customers make informed decisions about what to eat.

    Real Estate in Casual Dining

    The success of casual dining also intertwines with the commercial real estate landscape. Net Lease (NNN) properties have emerged as a preferred choice for many casual dining brands. These leases, involving the tenant’s responsibility for property expenses, align with the financial stability sought by real estate investors and free up capital for brands to invest in areas other than real estate. 

    The evolution of casual dining is a testament to the industry’s resilience and adaptability. From menu diversification to technological integration and strategic real estate choices, the transformation is driven by the desire to cater to changing consumer dining habits. As casual dining brands navigate these changes, they pave the way for a new era that promises delightful experiences for diners and viable investments for the commercial real estate sector.

    Is the Micro Coffee Trend Here to Stay or is it a Fad?

    In recent years, the coffee industry has witnessed the rise of micro coffee shops, also known as micro-roasted coffee, catering to a niche market seeking artisanal and unique coffee experiences. With popular brands like Dutch Bros. Coffee, Caribou Coffee Cabins, Scooter Coffee, and 7 Brew leading the charge, it is evident that the trend has captured the attention of coffee enthusiasts. 

    However, the question remains: is the micro coffee trend here to stay, or is it just another passing fad? In this article, we will delve into the world of micro coffee shops and their impact on the specialty coffee market.

    Micro Brew Coffee ShopsMicro Coffee Shops: The New Kid on the Block

    Micro coffee shops are defined by their unwavering focus on quality, craftsmanship, and delivering a personalized coffee experience. These establishments stand out by sourcing their coffee beans from specific regions, often emphasizing fair trade and sustainable practices. What truly sets them apart is the art of micro-roasting. By roasting in small batches, micro coffee shops can meticulously attend to every detail, resulting in a flavor profile that distinctly differs from mass-produced coffee. 

    The benefits of the physical size of micro coffee shops also play a significant role. As highlighted in articles like Change Is Brewing: The Future of the Physical Coffee Shop, smaller, more intimate spaces allow for personalized interactions between baristas and customers, enhancing the overall coffee experience. This emphasis on a cozy and intimate environment fosters a sense of community, setting micro coffee shops apart from the larger, impersonal chains. 

    For example, by intentionally reducing their physical space in the real estate and streamlining their products, brands, like Blank Street Coffee, are able to provide a small selection of high-quality options at an affordable price. Blank Street Coffee has established over 40 mini-cafes, with none exceeding 350 square feet in size.

    The Paradigm Shift in the Specialty Coffee Market

    The surge of micro coffee shops has ignited a significant shift within the specialty coffee market. Modern coffee enthusiasts are no longer satisfied with mere caffeine fixes; they crave an authentic coffee journey enriched with unique flavor notes and innovative brewing techniques. In response, traditional coffee giants have begun integrating micro-roasted blends and artisanal offerings into their menus, acknowledging the evolving demands of consumers.

    Embracing the Convenience: Micro Coffee on the Move

    One of the driving forces behind the popularity of micro coffee shops is their exceptional convenience. Many micro coffee brands, like Scooter Coffee, have embraced a mobile approach, strategically setting up shop in unexpected locations to cater to coffee lovers on the go. This shift towards convenient coffee aligns perfectly with the fast-paced lifestyles of modern consumers, making micro coffee an accessible and appealing choice.

    Drive Thru Micro Coffee

    The convenience factor is underscored in the Coffee & Convenience article, revealing that drive-thru coffee shops make a significant difference among today’s consumers. The speed and ease of drive-thru service caters to the demands of busy individuals, enabling them to savor high-quality coffee without disrupting their schedules. 

    Brands like PJ’s Coffee saw their drive-thru locations average 53.4% more revenue than locations without a drive-thru, and drive-thru purchases made up 65% of their total sales overall at drive-thru enabled locations in 2020. That’s some solid proof there!

    Dutch Bros. Coffee: Leading the Expansion

    Dutch Bros. Coffee, a pioneering figure in the micro coffee movement, has rapidly expanded its footprint with drive-thru coffee stands emerging across the nation. Their remarkable success has inspired other micro coffee brands to explore expansion opportunities, underscoring the growing demand for handcrafted, high-quality coffee experiences.

    Real Estate Dynamics: NNN Leases and Micro Coffee

    The escalating popularity of micro coffee shops has even sparked interest in the commercial real estate (CRE) market. Triple net leases (NNN) have become an enticing option for both micro coffee shop owners and investors. These leases transfer numerous expenses, including property taxes and maintenance costs, to tenants, making them an attractive prospect for those seeking investment opportunities within the specialty coffee realm.

    The Verdict: A Lasting Impact

    Micro Coffee ShopsConsidering the surge of micro coffee shops, their impact on the specialty coffee market, and their synergy with the commercial real estate sector, it becomes evident that the micro coffee trend transcends a fleeting fad. As more coffee enthusiasts yearn for distinctive experiences and flavors, micro coffee shops are poised to remain and continue shaping the coffee industry in the foreseeable future.

    Embracing the Future: The Enduring Legacy

    The micro coffee trend, characterized by micro-roasted coffee and convenient coffee shops, has etched a unique space within the specialty coffee market. Renowned brands like Dutch Bros. Coffee, Caribou Coffee Cabins, Scooter Coffee, and 7 Brew have not only introduced new flavor dimensions but have also revolutionized the coffee experience itself.

    Moving forward, it is undeniable that the micro coffee trend is far more than a passing fad. Its robust presence in the specialty coffee market and its allure for commercial real estate investors signify that micro coffee shops are destined for continuous growth and triumph. If you haven’t yet embraced the micro coffee movement, now is the time to embark on this aromatic journey and uncover the plethora of flavors that await you.

    Ground Lease vs. Fee Simple: Understanding Commercial Real Estate Leasing Options

    Unraveling the Choices in Commercial Real Estate Leasing

    When it comes to commercial real estate leasing, landlords and tenants have several options to consider. Two common types of leases are ground leases and fee simple leases. Each holds unique advantages and considerations for both parties involved. In this article, we will explore the key differences between these leasing options and their implications for landlords and tenants, with a focus on triple net leases and commercial real estate investment.

    Ground Lease: Unlocking the Potential of Land Ownership

    A ground lease is a long-term lease in which the tenant rents land from the landlord, gaining the right to develop and utilize the property during the lease term. The tenant is responsible for constructing and maintaining any improvements to the property, while the landowner retains ownership of the land. Because the landlord only owns the land, they have zero responsibility to the building and cannot take depreciation. After the lease term ends, the landlord assumes all improvements the tenant made to the property.

    Fee Simple Lease: Absolute Ownership and Control

    A fee simple lease, also known as an absolute triple net lease, is a traditional lease where the landlord retains  absolute ownership of both the land and any improvements to it, leasing both to the tenant. The tenant has no ownership of the building or land, but assumes full responsibility for property management and all associated costs.

    Evaluating NNN Leases within Ground Leases and Fee Simple Leases

    Triple Net Lease | Image of Storefronts under constructionTriple Net Lease in Ground Lease

    In a ground lease with a triple net lease arrangement, the tenant bears the responsibility for all property-related expenses, including taxes, insurance, and maintenance costs. The landlord enjoys a steady income stream without the need to manage property management tasks. The landlord only has ownership of the land until the lease term ends or the tenant vacates the property, after which the building ownership goes back to the landlord who may re-tenant the property.

    Triple Net Lease in Fee Simple Lease

    Within a fee simple lease with a triple net lease structure, the landlord retains absolute ownership, while the tenant assumes all property management and maintenance obligations. This lease type offers investors the potential for long-term passive income without direct involvement in property upkeep. Absolute NNN leases are typically offered to creditworthy or investment grade tenants with a credit rating of BBB- or higher.

     

    Choosing the Right Lease Option: Factors to Consider

    Risk and Control

    Ground leases offer landlords the advantage of retaining ownership and control over the land, while giving the tenant the autonomy to make decisions regarding the property.

    Investment Horizon

    Both lease options are generally long term and are well-suited for long-term investors. That said, Ground leases are generally longer and are a good choice for those who wish to generate passive income from land assets, whereas fee simple leases appeal to investors seeking complete ownership and more active involvement in property management.

    Property Development

    Ground leases allow tenants to develop the property according to their business needs, while fee simple leases retain some landlord control over property improvements and renovations.

    Additional Points to Consider

    • The length of the lease term is a key factor to consider, as it will affect the tenant’s investment horizon.
    • The rent payments in a ground lease are typically lower than those in a fee simple lease, as the tenant is not responsible for the cost of the land. The lower rent generally means they can be purchased for a lower price.
    • The tenant in a ground lease may be required to make periodic payments to the landlord for the cost of property taxes and insurance, but generally they are structured as net leases with the tenant paying for those expenses directly.
    • Both lease types offer consistent monthly income with little to no involvement from the landlord. The creditworthiness of the tenants as well as corporately backed leases can provide some additional investment stability.

    Making the Best Decision for Your Commercial Real Estate

    Fee Simple | Land Being Developed

     

    Choosing between a ground lease and a fee simple lease involves various considerations, including investment goals, risk tolerance, and desired levels of involvement in property management. Both leasing options offer unique benefits for landlords and tenants, with NNN leases providing an additional layer of stability and income potential for investors in commercial real estate.

    QSR Success: Chick-fil-A – A Strong NNN Lease Tenant

    Chick-fil-A is one of the most successful quick-service restaurant QSR franchises in the world, with over 2,800 locations in the United States and Canada. The company’s net worth is estimated to be over $14 billion, and its stock value has steadily increased in recent years. Chick-fil-A‘s success is due in part to its commitment to exceptional customer service, high-quality food, and a strong brand reputation. 

     

    Chik-fil-A's QSR Success | Image of very busy fast food restaurant

     

    One of the factors that has contributed to Chick-fil-A’s success in commercial real estate is its use of triple net leases. NNN leases transfer all property expenses, such as property taxes, insurance, and maintenance, from the property owner to the tenant. This frees up the property owner’s time and resources, allowing them to focus on other aspects of their business. 

     

    The Key to Commercial Real Estate Investing Success

    The Key to QSR Success | Two women shaking hands over busines dealNNN leases are a type of lease agreement in which the tenant is responsible for all property expenses, including real estate taxes, insurance, and maintenance. 

    This provides a steady stream of income for property owners, because, even if the property is vacant, the tenant is still accountable for the property expenses. This can be a valuable asset for property owners, especially during economic downturns. 

    Another benefit of NNN leases is that they can help to increase the value of the property. This is because NNN leases are seen as a more stable investment than other types of leases. As a result, investors are more likely to pay a premium for properties that are leased under NNN agreements.

     

     

    Additional NNN Lease Benefits for Investors

    NNN leases are relatively illiquid, meaning that they are not easily sold or transferred. This can make them a more attractive investment for long-term investors who are looking to avoid volatility. 

    Also, NNN leases are often backed by a corporate guarantee, which provides investors with additional protection in the event of default. This can help to mitigate risk and ensure that investors receive their full investment, even if the tenant goes bankrupt.

     

    Chick-fil-A as an NNN Lease Tenant

    NNN Lease Success | Chik-Fil-A Sign

    Chick-fil-A is a highly desirable NNN lease tenant. The company has a strong track record of financial success, and it is known for its commitment to quality and customer service. This makes Chick-fil-A a safe investment for property owners, and it can help to increase the value of the property. 

    In addition, Chick-fil-A typically signs long-term NNN leases, which can provide investors with even more stability. The company’s current average lease term is 20 years, with some leases lasting as long as 30 years. 

    By partnering with a proven brand like Chick-fil-A, investors can achieve long-term financial growth and stability. NNN leases can provide a steady stream of income, help to increase the value of the property, and offer additional protection in the event of default. 

    If you are looking for a safe and reliable investment, consider investing in a property that is leased to a strong tenant such as Chick-fil-A. You can be confident that your investment will be protected by the company’s strong financial performance and commitment to quality.