Triple Net Lease Modelling Question
Hi all, having some trouble with my model here. When making a NNN lease for a single tenant asset, how do you model it in a dynamic way? I currently have my Expense Reimbursements as a Revenue in my Effective Gross Income.
My Opex consist of Taxes, Insurance, Maintenance, and Property Management Fees (% of EGI).
My Expense Reimbursements is being directly pulled from my total Opex.
I'm having a circular reference error as my Prop. Mgmnt. Fee is calculated based off of EGI, and my Expense Reimbursement (part of EGI), is calculated based off Opex.
How do you avoid this? Also, in a NNN lease, am I correct to assume that 100% of your expenses, including property management fees, goes back to the owner?
Sounds like this is in excel, so I think you just haven’t to enable iterative calcs, put it in manual, and then just f9 that shiz until it’s right.
Enable iterative calcs in excel. Should work
Thanks! I forgot to mention that I have it in enable iterative calcs mode. However, my NOI does not equal my EGI. In reality, if all my expenses are reimbursable, that should be the case. Any tips? And also, is there any way to do this without iterative calcs?
You are miscalculating the expenses most likely.
I'm always baffled as to why people model NNN leases this way unless it is a NNN partition in a larger complex.
If it is NNN just put
Rent: $X
Expenses: $0
NOI: $X
I swear to god the people reviewing these models for jobs are just fucking with everyone.
I don't give a fuck what the expenses are if I have a single tenant NNN property. Shit I make the tenant pay everything directly.
To answer your second question, every lease is different. While a NNN should reimburse for all/most expenses, you need to read the lease. For example, some tenants like Starbucks reimburse a 100% but they have provisions where they only reimburse part of the a PM fee up to a certain limit. The sharper tenant reps have clauses with clear limits on management fees and other fees in order to avoid getting hit with excess charges. While NNN is super easy to underwrite, you need to ensure you're reading the leases.
Breakout expense reimbursements into exp reimb, excl mgmt fee and reimbursed mgmt fee. In opex, if management fee is % of EGI, calculate it based on base rent + Exp reimb excl mgmt fee + other income. This will avoid circularity and also not likely to be able to charge a management fee on top of a management fee (if the reimbursement is within EGI).
Can someone post their best NNN excel model on here since it’s so simple? Just want to see if there is any model that includes all the nuance.
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