What Are “Bondable Lease” Investments and Are They Good to Own?

A bondable lease is a sub-variant of the popular single-tenant net lease. These are, as the name partially implies, leased to a single tenant on a net basis, which means the tenant is responsible for a portion or all of the taxes involved, including maintenance costs and insurance fees for the property. 

In most cases, these leases are triple net, which means that the tenant is responsible for all operating expenses. The leases are, in most cases, long-term – from ten to 25 years and are often behind famous names like McDonald's and Starbucks. 

As you can see, most of what's involved in these net leases is extremely beneficial for the owner. They are already proving to be worthwhile investments for all landlords and real estate investors. 

However, there’s more to it:

The Many Benefits of Bondable Leases

Triple net or NNN leases have a wide set of benefits:

They boast relatively high liquidity as there is an extensive investor network behind these leases, including numerous big names, besides the one we already mentioned.

They have reasonably high entry price points. One would expect that NNN leases are incredibly costly as they bring forward many benefits. However, only properties behind large companies tend to trade at extremely high prices, while most other properties have entry prices as low as $500,000.

As a landlord of a NNN leased property, you have very few responsibilities. The leases are designed to put most of the responsibilities for the property in the tenant's hands, leaving the landlord to reap the benefits, without carrying the costs.

Because NNN leases are long-term and given to a single tenant who can afford to pay for all the expenses, they represent one of the most stable and predictable cash flow assets for investors. 

In most cases, NNN leases are not backed by loans, but by the tenant’s credit. 

Now, it’s important to mention that these are all benefits of NNN leases, while bondable leases have even more. They are, essentially, the most extreme form of triple net leases, as they place not only all the costs on the shoulders of the tenant, but all the property-related risks as well.

That means that with bondable leases, you get the chance to reap the benefits of favorable rents without worrying about the costs or the risks that befall your property. 

The tenant is the one who has to repair the roof and the structure when needed, and in the case of extreme damages, they are very likely to be required to rebuild the property or continue to make rental payments.

The Bottom Line

When you take a look at all of the benefits of triple net leases and their subset, the bondable triple net lease, you quickly conclude that it's extremely worthwhile to own them. 

Investors get to reap the benefits of high and stable rent, while the tenant is the one who cares for all property-related expenses and risks. 

All of this makes bondable lease investments very valuable to have. For more information, you may reach me at jkillinger@cbicommercial.com.

How Can a Landlord Reposition a Failing Mall?

Many major retailers are going down the drain as of late. Many of them have gone bankrupt in the last few years.

One of the biggest consequences of these bankruptcies is the fact that the malls housing them are also failing. This may be due to the e-commerce industry, which is undoubtedly problematic for shopping malls.

With that in mind, we thought it prudent to advise landlords on how they can reposition a failing mall and still find success. Let's take a look at what you can do.

Why Are Malls Failing?

The shopping mall rose to popularity in the 70s and 80s. Consequently, developers used this opportunity to build, and by 2016, the U.S. had 23.5 square feet of retail space per citizen. To understand how massive that is, Canada and Australia have 16.4 and 11.1 square feet, respectively. The two countries are right behind the U.S., which has the largest square feet of retail space per citizen on the planet.

So, in many ways, the malls ruined themselves with such massive expansion. In the world of today, there isn't enough need for such an enormous number of retail spaces. The newer generations are less and less interested in shopping, and when they are, they prefer to shop online than to go to the mall. Essentially, there isn't enough business for malls to stay open.

How Can You Find Success with a Failing Mall?

Even though the malls are failing, the buildings can still be used. They are massive investments that cannot be left to rot.

Landlords can reinvent the mall by adding something new to it, like chef-driven restaurants and movie theatres, for example. However, most of these improvements and changes are expensive, and there is still no guarantee that they will succeed.

If a mall is failing, there is no reason to keep it as a retail asset. Naturally, you can sell it if you manage to find a suitable buyer with a large enough offer. However, you can also try out some of the several available repositioning options.

How to Reposition a Mall

Shopping malls are large buildings, and one of the best ways to use them that's not retail-oriented is to turn them into warehouse facilities. Instead of using the building for selling products, it can be used for product distribution, as their location is often useful for it.

Outside of that, a failing mall can be turned into a:

• Farmer’s market

• Park

• Church

• College campus

• Medical facility

• Residential property

Many options exist, but you still need to choose one that’s best for you. You also need to consider the location of the property, what commercial tenants are looking for in the area, and what the current macro trends are. A radical change in the use of the property demands for a careful and detailed analysis.

After taking everything into careful consideration, you can be confident that the decision you make will pay off in the end. For more information, you may reach us at jkillinger@cbicommercial.com