Recent Closings - Triple Net 1031 Exchange Deals

We are pleased to announce the following recent closings: NNN Florida Walgreens: $8,662,371 - Sourced off-market deal through developer and broker network. Record setting cap rate of 4.85%. All cash transaction with 1031 exchange buyer.

Triple Net CVS: $6,450,000 - Low leverage 1031 exchange buyer. 24 years left on absolute net lease - 5.32% cap rate. Solid midwest location.

Net Leased Dollar General: ~ $1MM - high cap rate deal 8%+ with 7+ years on NN lease. Growing SE US location.

For more details or help on your NNN 1031 exchange, give us a ring at 1-866-539-1777.

Understanding Real Estate Due Diligence

There are many aspects associated with commercial real estate that can be confusing to new buyers or even escape those investors who should be savvy shoppers. When it comes to real estate due diligence, the subject is broad and often complex. Because of this, it makes sense to use a real estate due diligence expert when making a purchase.

What is Real Estate Due Diligence?

When an offer is made on a piece of property by a potential buyer and accepted by the seller, a contract is created. The contract allows the buyer to control the property while getting a “free look” to make sure the property is what they want.

In basic terms, due diligence is the process that a buyer and his advisors can use to obtain more information about the property. If the real estate due diligence uncovers concerns that were undisclosed or unknown, a buyer can legally terminate the contract and choose to not purchase the property without repercussions or penalties.

Use an Expert

While it is always best for a seller to disclose as much information about a property as possible, the buyer is ultimately responsible for completing the real estate due diligence and bears the risk of any problems that come along with a property.

Because there are so many aspects to consider, most buyers are unable to complete the due diligence process adequately without the help of a professional. A real estate due diligence expert knows what problems to look for in various types of properties and can save the buyer time, money and trouble when examining a property for potential problems.

Tools Your Due Diligence Expert Offers

Because there are so many aspects to consider, your real estate due diligence expert will probably use a real estate due diligence checklist. For residential properties, this real estate due diligence checklist can include tasks such as checking for lead, asbestos and mold. A good due diligence expert will also check property lines and access, water rights and the structural integrity of the building in addition to zoning, use and construction quality.

Do your homework! It is easier to get into a problem property than out!

Top 5 Reasons to Obtain a Land Survey

Guest Post by Will Schnier, P.E., President of BIG RED DOG Engineering | Consulting There are many reasons why somebody purchasing property would want to obtain the necessary survey products. For this discussion, at a minimum, I recommend that you should always obtain a current title survey, based on a title commitment less than 30-days old. A title survey will include information regarding property lines, location of improvements, easements, utilities and other conditions affecting the property.

I would also suggest that you consider obtaining a full tree, topography, and boundary survey in addition to the title survey if it’s appropriate for your purchase and project/investment intentions. The tree, topography, and boundary survey is also referred to as a design survey, and may be used by an engineer or architect to develop site development and building plans.

My top five reasons for you to obtain a survey are as follows:

1.) Know what you’re buying – the survey will identify the exact limits of the property boundary and improvements on the property.

Real estate can have title and boundary disputes (unfortunately it’s more common than you’d expect), which a title survey would help to uncover. Furthermore, relying upon tax district information on the lot or building size, or seller furnished documentation can be a recipe for expensive trouble without proper due diligence.

2.) Discover the presence and exact location of any easements, restrictions, or other encumbrances that may be imposed upon the property.

You may look out on a piece of property and see a green field, or a paved parking lot, and simply assume that that land is available for you to develop easily. How does that change if there are drainage or utility easements in that location? You may still be able to develop, yes, but your cost just went up a lot more than the cost of the survey.

Or suppose, you’re out in the county, not under the jurisdiction of a municipality that can impose zoning and land use restrictions. So you can build what you want right? What if a former owner of the property restricted its use, in an effort to promote a certain type of community? That 10-acre tract you intended to use for your commercial construction business may not be feasible if there is a deed restriction from 30 years ago limiting the use of the property to residential.

3.) If you’re spending significant money, it makes sense to an additional thousand or few thousand on a title and design survey.

Obtaining a title survey is an affordable way to obtain some more peace of mind with the transaction. Don’t be penny-wise and pound-foolish. You should do everything you can to protect the investment you’re making. A title survey could be as little as $1,000.

4.) The title and/or design survey can be used in the future to prepare drawings and exhibits, and to apply for building permits.

If you’re buying an office building for example, your prospective tenants may ask for a site plan showing the parking locations on the property – well now you have a survey you can supply them. Suppose again you want to apply for a minor building permit to expand the same office building - having a survey in hand will be a necessary step in that process.

5.) You can make the other guy pay!

All real estate contracts, residential or commercial, contain a clause specifically assigning the cost of the tile survey to either the buyer or the seller. Check the box next to the other guys name; this point is rarely an issue of significant contention during the negotiation process.

For more reading, I would encourage you to visit the BIG RED Blog.  On you blog you will find very useful information on the land subdivision and site development permitting process, and highlights of specific BIG RED DOG projects, such as our new downtown Austin hotel at 416 Congress Avenue.

About Will Schnier, P.E.:

Will Schnier is the President of BIG RED DOG Engineering | Consulting. He has been responsible for the project management, engineering design, and regulatory permitting of numerous multifamily residential, retail, office, and industrial site development projects throughout central Texas. He can be reached by email at Will.Schnier(atsign)BIGREDOG.com or by phone at (512) 669-5560.

About BIG RED DOG Engineering | Consulting:

BIG RED DOG is an Austin, Texas-based civil engineering firm specializing in land development engineering, permitting, and land use consulting. Our team of professional civil engineers and certified land planners has over 100-years of combined experience in the Austin and central Texas market. Our commercial project experience includes multi-family, hotel, office, industrial, retail, and single-family subdivision development projects throughout central Texas.

Sell Your Commercial Property

Is your commercial property driving you crazy? Too much management? Not enough income? Do you need to sell your commercial property fast? Not sure what to do with your commercial property? Time to move on? Or... just need help selling your commercial property for the maximum value?

If you answered "yes" you are at the right place.

We are your national commercial property sales solution.

Sell My Commercial Property

We buy commercial property:

• any location
• any price
• any condition
• any situation

We love to buy:

• commercial buildings
• commercial land
• apartment buildings
• trailer parks

Andrus & Morgan works with commercial property owners nationwide. We will buy your commercial property quickly for cash or help you figure out the best course of action.

NNN Drug Store Cap Rates and NNN Market Report

NET LEASE DRUG STORE REPORT RELEASED The Boulder Group has released The Net Lease Drug Store Report. The report provides comprehensive numbers and analysis of the net lease drug store property market.

Highlights of the report include:

• Cap rates for Walgreens, CVS and Rite Aid are at historic lows
• The supply of CVS properties on the market increased by 64%
• Drug store properties are commanding a 75 basis point premium over the retail net lease market

The full report can be found here: Net Lease NNN Drugstore Report

Social Investing in Real Estate

All of my clients want to earn a reasonable rate of return on their passive real estate investments but more and more they also want to do something good if they can at the same time.  Enter Social Investing.  While real estate is not the norm in social investing there are several commercial real estate investments that provide safe, secure long term yield while at the same time doing something to help other people and/or the environment.  Here are a few of the investments my clients are considering when investing in commercial real estate in a socially and environmentally conscious way:

• Green and LEED certified buildings
• Historic Preservation and Rehabilitation
• Community Investments such as non-profit tenanted buildings and conservation easements
• Buildings with solar features, gray water systems and/or green roofs
• EnergyStar certified buildings

Contact TMO for assistance in planning your next social investment in real estate. email or 1.866.539.1777

Here is some general info about Social Investing.

Social Investing Definitions:

•    Socially responsible investing, also known as socially-conscious or ethical investing, describes an investment strategy which seeks to maximize both financial return and social good. Source

•    Limiting one's investment alternatives to securities of firms whose products or actions are considered socially acceptable Source

•    Social investing is the deliberate effort to invest money in financial securities that reflect your personal social attitudes while avoiding financial securities that support things you disagree with. It can also reflect religious, political or environmental beliefs as well. Social investing stems from the philosophy that financial support of something is the same as endorsing it. Source

Contact TMO for assistance in planning your next social investment in real estate. email or 1.866.539.1777

Most Relevant Sites on Social Investing and Social Investments:

1. What Is Social Investing? Discusses Identification, Significance, Geography, Effects and Considerations of Social Investing. http://www.ehow.com/about_4614985_what-social-investing.html

2. Social Investing Business Ethics. The Magazine of corporate responsibility http://business-ethics.com/

3. Socially responsible investing (wikipedia) Wikipedia information about Social Investing http://en.wikipedia.org/wiki/Socially_responsible_investing

4. Social Investment Forum The Social Investment Forum (SIF) is the US membership association for professionals, firms, institutions and organizations engaged in socially responsible and sustainable investing. SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. http://www.socialinvest.org/

Contact TMO for assistance in planning your next social investment in real estate. email or 1.866.539.1777

1031 replacement property- try a NNN net leased property

Need a 1031 replacement property for your 1031 Exchange? Forever leave the day to day management of your office building, apartment building or other gross-leased property behind.

Invest in a "hands-free" net leased property and spend your time doing what you want rather than dealing with tenant's needs.  Triple net leased properties (NNN) provide long term cashflow without the headaches of management.  Let the property work for you rather than you working for the property and enjoy the benefits of "mail box money".

Contact TMO to find out more about the benefits of Triple Net Leased Real Estate Investments. 1.866.539.1777

Here are just a few of the reasons why you should buy a NNN property for your 1031 exchange:

• armchair investment- ease of management with tenant maintaining and operating the property
• mail box money-  your monthly rent is yours, net to you, no expenses to pay
• long term cash flow-  leases usually range from 10 to 25 years
• high credit tenant- financially strong tenants usually publicly traded
• good appreciation-  regular rent increases provide for increase in future value
• non-recourse financing- lenders will loan on credit of tenant and strength of lease, waiving a personal guarantee by you as buyer
• easier to sell- when time comes to sell, demand is almost always strong for a NNN leased property, even in down markets
• higher residual value- net leased real estate is usually built-to-suit for retailers who have researched the market and location to find the best site to do business

Contact TMO to find out more about the benefits of Triple Net Leased Real Estate Investments for your 1031 exchange.

What is Triple Net NNN? Here is triple net lease definition

CVS NNN For Sale - Available NNN deals

CVS NNN deals continue to be in hot demand. Long term net leases of 20 or more years with a solid credit rated and no landlord responsibilities. CVS NNN make great 1031 Exchange replacement properties.

Here is a quick list of CVS NNN properties for sale that have been of interest to our NNN clients and may be of interest to as well.

CVS NNN Properties For Sale

Call 1-970-618-4086 for more info on these CVS NNN Properties For Sale.

5 Tips for Your Next Ground Lease Investment

Ground lease investment properties are some of the most unique types of NNN opportunities. While a regular "fee simple" triple net investment consists of both a building and the land on which it sits, a ground lease investment (which is also, technically fee simple) consists of just the ground. Instead of getting rent for the building, you get rent for the use of your ground.

Here are some tips for how to buy and profit from a ground lease investment:

1. Look for good tenants. Frequently, a ground lease investment will have a very strong tenant. McDonalds locations are frequently available as ground leases and many bank branches can also be purchased as ground leases.
2. Plan on appreciation. One of the drawbacks to buying a ground lease investment property is that you usually won't be able to depreciate it. The IRS doesn't let you depreciate land since it doesn't lose value over time through deterioration like a building would. The upshot of this is that you're not buying the part of real estate that loses value -- you're getting the good part. While the building on your land might be obsolete in 20 years, the land itself shouldn't be.
3. Pay a little bit more. A ground lease investment will usually a carry a lower cap rate than other triple net properties. First, you're usually buying a property with a good tenant, which in and of itself carries a lower cap rate. Second, income from land is usually valued at a higher multiple than income that comes from a mixture of land and building.
4. Leverage capital that's been 1031 exchanged a few times. When you've done a few 1031 exchanges, you end up with so much old basis that it gets part to effectively depreciate a new investment. Since you generally can't depreciate a ground lease investment anyways, using your oldest capital to buy it helps to free up money with more basis attached to it for acquiring depreciable assets.
5. If it looks too good to be true, it is. Sometimes, you'll see a ground lease asset that seems like a screaming deal -- instead of being a 6.5 cap in an 8 cap marketing, it'll be a 10 cap. If you find one of these, proceed with caution. Sometimes, a broker will list a leasehold interest as a ground lease. When you buy a leasehold interest, you aren't buying dirt, though. You're buying the building and its right to use the land -- which eventually expires. While a leasehold interest can be a good choice, it's very different from a true ground lease investment and is less expensive for a reason.

Ground Leases For Sale

Contact Thomas for more information about ground lease investments via email or toll free at 1-866-539-1777 or see ground leases for sale.

How To Find The Best NNN Properties For Sale

Finding a good selection of NNN properties for sale is not as easy as you might hope. Because there is no reliable central repository of commercial listings, the NNN properties for sale in the market are typically spread across a number of different resources, only some of which are freely available to the public.

Internet Listings of NNN Properties for Sale

There are a few sites which present NNN properties for sale as well as other commercial real estate listings. The two best known, Loopnet and Costar Exchange, are in the process of merging. Both allow just about anyone to post listings of NNN properties for sale, as well as other property types. While Costar lets anyone search its database, Loopnet only gives full access to paying subscribers. The key problem with these sites is that many of the best NNN properties for sale never make it on to them.

Principal Listings of NNN Properties for Sale

Many principals, whether they are owners or developers, list their own NNN properties for sale on their websites. CrestNetLease and Kimco Realty are two such ownership groups that do this, and Bencor Development is an example of a developer that posts its NNN properties for sale right online. Although direct principal to principal marketing can yield you access to inventory, it is a great real of work to visit each of these sites. In addition, because you do not have an expert guiding you, you may not know which of the NNN properties for sale that you see are good deals and which are not.

Hire A Professional Broker to Bring You NNN Properties for Sale

The easiest way to find NNN properties for sale is also the best way. Instead of spending your time to scour the Internet to find just a small subset of the NNN properties for sale out there, hire a broker and let him do the work for you. Your broker should have not only a strong knowledge of all of the places to look for NNN properties for sale, but should also have insider access to listings that you may not be able to see. In addition, he should be able to guide you to not only good NNN properties for sale, but to the best NNN properties for sale for you and your specific needs. In addition, because most sellers will pay your broker’s commission, the service and guidance that he brings you should not even cost you anything.

{ Article: How to Choose the Best Triple Net Broker }

Buy a NNN Property

Or call Thomas Morgan, CCIM, a Triple Net NNN Broker, at 1-866-539-1777

The Pros and Cons of Triple Net Properties

In some ways, triple net properties are as much fixed-income investments as they are real estate vehicles. Offering little to no management responsibility and long-term fixed incomes with the potential for gradual increases, they act like bonds. However, underlying their financial structures, they are still real estate and carry the same eventual risks and challenges. Here are some of the pros and cons of triple net lease properties.:

Pro: Stable Income Con: Limited Upside Triple net leases are usually structured with a flat rent or with fixed increases. When you buy a $2,000,000 property at a 7.5 percent cap, you know that you can count on $150,000 per year for the life of the lease. Many triple-net properties also have rent increases of 1 to 3 percent per year built-in. They provide some growth, but don't necessarily keep up with inflation. However, this is no different from buying a corporate, Treasury or municipal bond with a fixed rate of return.

Pro: Long-Term 100% Occupancy Con: Risk of 100% Vacancy Most triple net properties come on the market with a lease of at least 10 years, with some having initial terms as long as 25 years. This gives you a long time during which you don't have to worry about partial or full vacancy. The drawback is that when the lease does expire, it's an all-or-nothing proposition. The same occurs in the event of a tenant default, although careful due diligence before purchase can reduce the risk of this occurring.

Pro: Attractive Cap Rates Con: High Price Relative to Underlying Value Single tenant properties typically trade at attractive cap rates that are hundreds of basis points above comparable non-real estate investments. They're also frequently priced lower than more traditional investment real estate alternatives on a cap rate basis. A large portion of their value comes from their income stream, though, meaning that they could lose value when vacant or as their remaining lease term decreases.

Pro: No Management Con: CapEx at Rollover True triple net properties are structured so that the owner has no responsibilities whatsoever during the lease period, while others transfer some capital expenditures to the owner. In either case, the ownership experience is very different from traditional real estate. However, when the lease rolls over, owners have to get involved in the re-leasing process and in any necessary capital expenditures to prepare for a new tenant.

What do you see as the benefits and risk?

Buy a NNN Property

Contact Thomas Morgan, CCIM Triple Net NNN Broker at 1-866-539-1777

Current NNN Cap Rates

Here is a great chart of current asking cap rates for single tenant NNN deals. It is sorted by NNN tenant and NNN year built. Originally published in Western Real Estate Business May 2013. Data by Boulder Group.

What is the smartest real estate investment strategy?

Great question posed on National Real Estate Investor online as a poll. My answer: Value-Add

Looks like I scored an "A" on this test.

What strategy are you pursuing?

Here is a quick summary of real estate investment strategies via Wikipedia:

Private equity real estate funds generally follow core-plus, value added, or opportunistic strategies when making investments.

Core Plus: This is a moderate risk/moderate return strategy. The fund will generally invest in core properties however some of these properties will require some form of enhancement or value-added element.

Value Added: This is a medium-to-high risk/medium-to-high return strategy. It will involve buying a property, improving it in some way, and selling it at an opportune time for a gain. Properties are considered value added when they exhibit management or operational problems, require physical improvement, and/or suffer from capital constraints.

Opportunistic: This is a high risk/high return strategy. The properties will require a high degree of enhancement. This strategy may also involve investments in development, raw land, and niche property sectors. Investments are tactical.

"Ignore the Recession" - More reasons to buy a Net Leased TSC

TSC is one of my favorite NNN tenants. Nice buildings, great locations, solid financials, long leases, low management for owners; the list goes on and on. ABC News Nightline did a segment this week of why TSC is a "Recession Proof Retailer". TSC's internal strategy has been to "ignore the recession". It appears to have worked.

VIDEO:

[Buy a NNN TSC Property]

Here is a link to TSC's (TSCO) five year stock price.

Buy a Tractor Supply NNN Property

Over 7.5% annual returns expected

Pension funds expect commercial real estate to generate annual returns of over 7.5% for next three years. Expected yields are higher for apartments and industrial commercial real estate.

National Real Estate Investor magazine reported this study by NCREIF:

NNN Properties and Your Future

NNN properties are a popular avenue for commercial real estate investment. These are typically single-tenant retail properties where the tenant is responsible for paying real estate taxes, providing their own property insurance and taking care of all property maintenance. Tenants take care of these expenses in addition to other monthly costs such as rent and utility payments. Part-time investors can find NNN properties to be an appealing real estate investment option. It offers a guaranteed stream of income from a real estate investment while also absolving the investor of carrying out many day-to-day management responsibilities for the property.

Other advantages NNN properties offer are significant. An investor can lock in a long-term lease with a tenant who sets up shop in NNN properties. They can enjoy tax benefits that come from investing in commercial or residential real estate. Finally, successful NNN properties can act as a gateway for securing additional financing to use on other investments.

There are risks in leasing out triple net properties to the wrong tenant. An investor needs to know how to identify a good tenant versus a bad tenant. Assessing the worthiness of any tenant requires an investor to examine a company's business model and the state of its finances. Signing up a tenant in haste can result in disaster for any investor.

A company's credit rating offers an indicator of risk for default. While no investments outside of a federal bond offer a zero percent default rate, a tenant possessing an investment grade credit rating presents less of a risk for NNN properties.

Leasing NNN properties to a company essentially provides them capital. An investor needs to know if their tenant can guarantee long-term success with that capital. Investors should examine multiple criteria when choosing tenants for their triple net properties. They should examine a company's debt to equity ratio, operating margins, the number of stores it operates, the outlook for that industry and how the company is managed.

Investors in NNN properties should also take into account other factors. A successful investment can hinge on everything from location and building size to economic conditions for a particular industry. Triple net properties work best for a smart investor who buys in the right location and selects a low-risk tenant.

Knowing local market conditions is essential for any serious investor. It is important to pay attention to everything from the employment rate to median income in a community before selecting a property. A bad investment can leave an investor with an empty building that is essentially a money pit.

In the end, NNN properties are a great passive income investment that produce low risk yields of 7% or more with little investor oversight and involvement. Contact Thomas to find out more about NNN properties or to buy/sell a NNN property: 1-866-539-1777 or e-mail.

Quora for Real Estate

Do you use Quora?  Maybe you like learning or teaching or are just plain curious or are trying to get an answer to that question that Wikipedia or Google could not answer. Quora is like Yahoo Answers on steriods.  The answers come from real people (real names shown as opposed to screen names) and those real people are usually experts in their fields.

When time permits, I like to jump on Quora to learn about interesting stuff and sometimes even give my two cents.  Here are some of my answers on Quora as related to real estate:

Real Estate Investment Question

Read Quote of Thomas Morgan's answer to Is buying an empty lot in downtown west Jefferson, north Carolina a good investment? on Quora

Real Estate Redevelopment Question

Read Quote of Thomas Morgan's answer to Urban Planning: How can dying downtowns be revitalized? on Quora

Commercial Real Estate Lease v. Own Question

Read Quote of Thomas Morgan's answer to Why is Google leasing and not purchasing its newest development? on Quora

Commercial Real Estate Vacancy Question

Read Quote of Thomas Morgan's answer to Commercial Real Estate: It seems that lots of commercial real estate will become vacant in the near future as more bricks and mortar retailers go bankrupt (more e-commerce). What could this excess real estate inventory be used for in the future? on Quora

Walgreens NNN Deal Round Up

Here is this week's round up of Walgreens NNN properties for sale across the the US. These Walgreens properties caught my eye as part of research for  Walgreens buyers I am working with.  Contact TMO for for details of these net leased Walgreens via email or 1-866-539-1777

Walgreens NNN in CA Price: $7,250,000 Cap Rate: 5.77% 60-Year Double Net Lease, -Rare Infill Location, -Over 650K Residents in a 5-Mile Radius, Hard Corner, Signalized Intersection, Strong Store Sales, Highly Visible Location. Learn more...

Walgreens NNN in CA Price: $11,060,000 Cap Rate:  5.75% Learn more...

Walgreens NNN in OK Price: $5,650,000 Cap Rate: 6.15% Ten (10), Five (5) year renewal options, Twenty-Five (25) year lease term with Seventeen (17) years remaining, 100% leased and guaranteed by Walgreen Co. (S&P: A) Learn more...

Walgreens NNN in TX Price: $7,285,000 Cap Rate: 6% Strong National Credit, Brand new 25 year absolute NNN lease, Signalized, Hard Corner Location. Learn more...

Walgreens NNN in KY Price: $4,179,000 Cap Rate: 6.75% Strong corporate Guarantee -Walgreens co., ranked #32 fortune 500 list 2012, America’s #1 Drug store. Learn more...

More Walgreens For Sale

Contact TMO for for details of these net leased Walgreens via email or 1-866-539-1777

Deals are a sampling of available Walgreen NNN inventory from around the US and are for reference only. Subject photos may not be actual location and are representative of Walgreen locations in general.

Who is your tenant? S&P Tenant Credit Ratings

When purchasing a single tenant net leased investment, tenant quality and the financial ability of the tenant to perform is of utmost importance. In essence you are buying the income stream and the bundle of rights subject to the leasehold.  What helps you evaluate the tenant as an investment grade tenant? How do you know you will get you monthly rent check for 10, 12, 15 or 20 years?  One way is to have the "market" rate the risk for you.

Here is the  S & P breakdown of credit ratings, to help you assess your risk.  Investment grade tenants are rated BBB- or better.

Long-Term Issue Credit Ratings

from S&P Issue credit ratings are based, in varying degrees, on the following considerations:

Likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; Nature of and provisions of the obligation; Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)

AAA An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

A An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

BBB An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

B An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.

C A subordinated debt or preferred stock obligation rated 'C' is currently highly vulnerable to nonpayment. The 'C' rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A 'C' also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

D An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Plus (+) or minus (-) The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

NR This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

Buy an Investment Grade Tenant Property