馃攳
Commercial Lease Structures [What NNN, FSG, and MG Mean] - YouTube
Channel: Tyler Cauble
[0]
commercial leasing can be confusing what
[2]
are triple net
[3]
full-service gross and modified gross
[5]
leases today we're talking about
[7]
commercial lease structures and the
[9]
differences between
[10]
each one commercial real estate like
[12]
many other industries
[13]
is full of its own lingo if you're
[15]
looking to lease commercial space you've
[17]
likely run across phrases such as
[19]
triple net or full service whenever a
[21]
broker or landlord was explaining what
[24]
type of lease they're using but what
[25]
does that
[26]
actually mean and maybe a better
[28]
question why are certain lease
[30]
structures utilized instead of others
[32]
let's dive into what triple net or nnn
[35]
full service gross
[36]
fsg and modified gross mg mean and the
[40]
differences between them
[41]
triple net leases in a triple net lace
[43]
the tenant pays the operating
[45]
expenses for the building these leases
[47]
are traditionally found in retail and
[49]
stand-alone properties however in recent
[51]
years
[51]
the triple net lease structure is also
[53]
finding its way into
[54]
office and industrial too triple net
[57]
stands for the three nets in a lease
[59]
common area maintenance property taxes
[61]
and building insurance
[63]
in these leases tenants are responsible
[64]
for paying their proportionate share of
[66]
these fees in addition to their base
[68]
rent utilities
[70]
and any maintenance within their
[71]
premises rents for a triple net lease
[73]
may be quoted as
[74]
30 dollars per square foot triple net
[76]
with five dollars per square foot in
[78]
pass-throughs why are triple net leases
[80]
used why would a tenant sign a triple
[83]
net lease and accept
[84]
all of the responsibility for those
[85]
expenses well more often than not the
[87]
structure is actually beneficial to them
[90]
and the landlord landlords prefer this
[92]
structure if possible because
[94]
any increases in the property taxes
[96]
building insurance
[97]
company maintenance and more will get
[99]
passed on directly to the tenant that
[101]
benefits from the exclusive use of that
[103]
property tenants prefer triple net
[104]
leases because they
[106]
know that the additional rent that they
[107]
pay towards maintaining the common areas
[109]
will be utilized
[110]
properly landlords don't or really
[113]
shouldn't make any money off of these
[115]
pass-through fees
[116]
tenants may also audit these expenses
[118]
annually so the landlords won't be
[119]
tempted to cut
[120]
costs on the quality of the maintenance
[122]
of the property in retail
[124]
image is everything and it ensures that
[125]
the property is well grouped
[127]
full-service gross leases in a full
[129]
service gross lease the landlord pays
[131]
all of the operating expenses of the
[133]
building full-service gross leases are
[135]
most commonly found in
[136]
office buildings but can also be found
[138]
in lower quality retail and industrial
[140]
centers
[141]
since this lease type is the most simple
[143]
of all three it is often used by more
[145]
unsophisticated landlords on
[147]
all property types full service gross
[149]
means pretty much as it sounds
[151]
the lease covers all of the expenses
[153]
that means that the tenant pays the
[155]
landlord one fee
[156]
they're rent and the landlord pays any
[158]
and all expenses on the property such as
[160]
the utilities
[161]
the common area maintenance taxes and
[162]
insurance which are the three nets
[164]
janitorial and more landlords or their
[166]
property management company will be
[168]
responsible for
[169]
anything and everything that needs to be
[171]
maintained in the building which can
[172]
even include
[173]
changing light bulbs for tenants rents
[175]
for a full service lease may be quoted
[177]
as
[177]
30 dollars per square foot full service
[180]
so why are full service leases used well
[182]
full service leases
[184]
are very straightforward and easy for
[186]
everyone to understand the tenant is
[188]
responsible for paying their rent and
[189]
the landlord is responsible for all of
[191]
the expenses and maintenance
[192]
so wouldn't tenants prefer this lease
[194]
structure then well depending on the
[196]
sophistication of the tenant
[198]
and the landlord maybe since the
[199]
landlord is responsible for coordinating
[201]
maintenance
[202]
handling repairs and restocking supplies
[204]
they could take these opportunities to
[206]
cut
[206]
costs in order to make more money
[208]
unfortunately landlords like that are
[210]
the reason why some buildings fall into
[212]
disrepair
[213]
however these lead structures can be
[214]
great for tenants since they are only
[216]
responsible for paying their rent and
[218]
can lean on the landlord for everything
[219]
else
[220]
modified gross leases in a modified
[222]
gross lease the landlord
[224]
and tenant both pay the operating
[226]
expenses on the property
[227]
modified gross leases are a hybrid of
[230]
the triple net and the full service
[231]
lease structures and there is no
[233]
guide as to which responsibilities fall
[236]
in the landlord or the tenant in this
[237]
scenario as it can vary depending on the
[240]
sophistication of the landlord
[241]
the type of business the tenant operates
[243]
the style of the property and more
[245]
as a hybrid between triple net and full
[247]
service modified gross can pass on
[249]
any number of the expenses or
[251]
responsibilities to either party the
[253]
landlord may
[254]
pay taxes while the tenant pays cam
[256]
insurance and utilities
[258]
the landlord may pay everything except
[260]
for the tenant's utilities
[261]
or utilities may be included in the rent
[263]
but cam is not there's really no
[265]
limitation as to how these leases may be
[267]
set up
[268]
rent on a modified gross lease may be
[270]
quoted as thirty dollars per square foot
[272]
plus
[272]
tenants pro rata share of cam so why are
[274]
modified gross leases used well modified
[277]
gross leases offer
[278]
far more flexibility for both parties
[281]
during negotiations it may also be
[283]
easier for the landlord to set up the
[284]
lease payments this way depending on how
[286]
the property was constructed or set up
[288]
prior to acquisition
[289]
some landlords may prefer to cover the
[292]
more controllable costs
[293]
such as insurance while passing off the
[295]
uncontrollable expenses
[297]
like utilities onto the tenant modified
[299]
gross leases may be used on
[301]
any type of real estate and can be a
[302]
good compromise for both the landlord
[305]
and the tenant depending on the scenario
[307]
so which commercial lease structure is
[308]
right for you well
[310]
unfortunately that's a very difficult
[311]
question to answer the best response to
[313]
just about every question in commercial
[315]
real estate is
[316]
it depends as you can tell there are
[318]
pros and cons for both parties in all
[321]
three lease structures so the market may
[322]
actually help determine
[324]
which route should be taken if all of
[326]
the leases for comparable properties in
[328]
your market are
[328]
modified growth structures you may have
[331]
a difficult time
[332]
instituting a triple net lease unless
[334]
the expenses end up being around the
[335]
same price
[336]
as always consult your commercial real
[338]
estate broker real estate attorney and
[340]
cpa
[340]
when deciding which path is best for you
[342]
and your venture there you have it for
[344]
commercial lease structures and what
[345]
they mean
[346]
for more releasing tips check out this
[348]
playlist here don't forget to like the
[349]
video and subscribe to the channel for
[351]
more commercial real estate investing
[352]
strategies
[353]
leasing and management tips market
[355]
updates and more
Most Recent Videos:
You can go back to the homepage right here: Homepage