Single-tenant net-lease investments and sale-leasebacks sit at the quiet, powerful center of commercial real estate: durable, contractually defined income backed by real property and a real operating business. Done well, they convert bricks and mortar into a bond-like stream of cash flow for the investor and a strategic pool of capital for the operator. The Gehrke Group advises on both sides of that equation with precision and discretion.
The term "net lease" describes who pays the property's operating expenses beyond base rent. The distinction is not academic; it determines how passive the investment truly is and how the asset should be priced. As you move up the spectrum, more responsibility shifts from landlord to tenant.
The lease is the asset. In single-tenant net lease, you are underwriting a lease and a tenant as much as a building. Two identical drug stores across the street from each other can trade at very different prices because one carries an absolute NNN lease with a corporate guaranty and the other an NN lease with landlord roof-and-structure exposure. Precision in reading the document is where value is protected.
Net-lease assets appeal to a specific investor mindset: one that prizes predictability over management-intensive upside. The attractions are structural, not speculative.
These traits make single-tenant NNN a natural fit for 1031 exchange buyers replacing management-heavy property, and for retirees and passive investors seeking dependable income without the demands of active operations. Because escalations and long terms are contractual, the strategy also pairs well with estate and legacy planning.
A property's capitalization rate, its first-year net operating income divided by price, is the market's shorthand for risk and growth. Lower cap rates mean higher prices; higher cap rates mean lower prices. In net lease, several factors move the needle, and they interact.
Investment-grade corporate tenants price far tighter than non-rated operators. A corporate guaranty carries more weight than a single-unit franchisee guaranty.
More years of contractual rent lowers re-tenanting risk. Long weighted-average lease term compresses cap rates; a short tail widens them.
Frequent, meaningful bumps add growth and inflation protection, supporting a lower entry cap rate.
Location, traffic counts, demographics, and rent-to-sales health determine value if the tenant ever vacates. Strong dirt matters.
Net-lease pricing is sensitive to the cost of capital. As benchmark rates move, cap rates tend to follow, since buyers compare yields to bonds.
Absolute-net terms, strong guaranties, and clean landlord obligations reduce risk and expense leakage, and are rewarded with pricing.
The central tradeoff: stronger credit plus a longer term produces a lower cap rate and a higher price, while weaker credit or a shorter term produces a higher cap rate and a lower price. Neither is inherently better; the right answer depends on an investor's objectives, risk tolerance, and time horizon. All cap rates and returns referenced here are illustrative and market-dependent.
Yield versus durability. A 5.25% deal on an investment-grade tenant with twenty years remaining and a 7.25% deal on a non-rated franchisee with eight years left are not the same investment wearing different price tags. We help clients weigh headline yield against the durability of the income behind it.
Single-tenant net-lease spans retail, medical, and industrial uses. Each sector carries its own credit, real-estate, and durability profile.
A sale-leaseback is one of the most elegant tools in corporate finance and the heart of this practice. In a single transaction, an owner-occupant sells the real estate it operates from to an investor and simultaneously leases it back under a long-term lease, becoming the tenant. The business keeps operating in the same location without interruption, but its balance sheet is transformed.
For a company that owns its real estate, that equity is often its largest illiquid asset, capital that sits idle while the business could deploy it for growth. A sale-leaseback puts it to work.
Financing versus flexibility. A mortgage lets you keep the asset but caps how much you can extract and adds debt covenants. A sale-leaseback releases far more capital and shifts ownership risk to a long-term investor, at the cost of paying rent instead of holding the appreciation. The right choice depends on the operator's cost of capital and growth plans.
On the other side of the table, the buyer acquires something difficult to source in the open market: a built-in, creditworthy tenant committed to a fresh long-term lease at market rent. Because the seller is the operator that knows the location's value best, their willingness to sign a long lease is itself a signal of commitment. The investor steps into day-one income with a clear, contractually defined return.
The defining feature of a sale-leaseback is that its lease terms are negotiated fresh at closing rather than inherited. Rent, term length, escalation schedule, guaranty strength, and renewal options are all engineered simultaneously to balance two goals: maximizing the sale price the operator receives and keeping the resulting asset attractive and financeable for the investor. Set rent too high and the price rises but financeability and coverage suffer; set it too low and the operator leaves value on the table. This calibration is where experienced advisory earns its keep. Hugh Gehrke spent years on exactly this work, and it is central to how The Gehrke Group approaches every mandate.
We clarify the operator's capital needs or the investor's return targets, then assess the real estate, business, and credit profile.
We model rent, term, escalations, and guaranty scenarios to find the structure that optimizes both proceeds and asset marketability.
We draft the economic terms of the leaseback in coordination with counsel so the document supports value and financeability.
For sellers, we position the offering to the deep national pool of net-lease capital to drive competitive pricing.
We manage offers, coordinate debt where relevant, and align terms across seller, buyer, and lender.
We shepherd inspections, estoppels, and documentation through to a clean, on-time closing.
Net-lease and sale-leaseback transactions rarely close on cash alone. Lenders view credit-tenant net-lease assets favorably precisely because the income is contractual and often investment-grade, which can translate into attractive loan terms. The way a leaseback is structured, its rent coverage, term, and guaranty, directly affects how much leverage the asset supports and at what cost. We coordinate closely with our capital markets and lending practice to align lease structure with debt so the financing strengthens the deal rather than constraining it. Sophisticated net-lease investors also weigh these opportunities against broader strategy, drawing on advisory and market research and, where portfolios span asset classes, our investment sales and multifamily capabilities.
Net-lease is a national asset class. A pharmacy in the Midwest and a distribution center in the Southeast trade in the same capital market as anything in California, and yields are frequently more compelling outside high-cost coastal markets. Los Angeles owners and 1031 exchange investors routinely place capital across the country to secure the credit, term, and cap rate they want. Hugh Gehrke's practice is built for exactly that: rooted in Los Angeles, transacting nationwide, and equally comfortable representing a local operator pursuing a leaseback or an LA-based investor deploying exchange proceeds into net-lease assets far beyond the region.
Under a typical triple-net (NNN) lease the tenant pays taxes, insurance, and maintenance, but the landlord may still be responsible for the roof and structure. Under an absolute (bond) net lease the tenant is responsible for everything, including roof, structure, and capital repairs, making it the most truly passive version of the asset.
A sale-leaseback can monetize close to 100% of a property's market value, versus roughly 60% to 75% through a conventional mortgage, because the operator is selling the asset rather than borrowing against it. Figures are illustrative and depend on the property, tenant, and market.
Investors accept a lower yield for income they view as safer and longer-lasting. A high-credit tenant on a long lease with escalations behaves like a durable, bond-like stream, so buyers pay more for it, which shows up as a lower cap rate.
Lease payments are generally deductible as an ordinary business operating expense, and the structure may offer additional efficiencies, but treatment depends entirely on your specific circumstances and accounting. Consult your CPA and counsel before proceeding.
Investors frequently pair net-lease strategies with 1031 exchanges to defer gains while acquiring passive income. The interaction of a leaseback with an exchange is fact-specific, so structure it with qualified tax and legal advisors. See our investment sales page for exchange context.
Single-tenant net lease and sale-leasebacks reward advisors who understand credit, lease documentation, capital markets, and operating-business needs all at once, because a leaseback is corporate finance and real estate in the same transaction. Hugh Gehrke brings that combination directly. As former Senior Vice President of Investment Sales and Capital Markets at DWG Capital Group, he oversaw brokerage services and raised capital for the Great American Industrial Fund with a focus on single-tenant NNN sale-leasebacks, the very structures at the heart of this practice. With more than 18 years in commercial real estate and a degree in Economics and Finance from the University of Illinois, he pairs institutional discipline with the attention of a boutique. The Gehrke Group advises operators unlocking the value of their real estate and investors building durable, passive income, in Los Angeles and across the country. To discuss a potential sale-leaseback or a net-lease acquisition, contact Hugh directly.
This page is provided for educational and informational purposes only and does not constitute legal, tax, accounting, or investment advice. Cap rates, loan-to-value ranges, lease terms, and returns referenced here are illustrative, market-dependent, and not guaranteed; actual results vary with tenant credit, deal structure, and prevailing capital-market conditions. Tax treatment, including the deductibility of rent and the interaction of any transaction with a 1031 exchange, depends on each party's specific circumstances. Consult your own CPA, attorney, and financial advisors before making any investment or financing decision.
Whether you're buying, selling, financing, or simply exploring the market, Hugh brings 18+ years of Los Angeles commercial real estate experience to your side.
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