The most important thing when valuing a triple net asset is understanding the average cap rate that a certain produce type trades at. If you know that a new construction 7 – Eleven with a 15 year lease in a tax free state (TX, FL) trades for a 4.75% Cap Rate all you need to know is the Annual Rental Income. Shopping centers, office buildings, and other multi-tenant deals must take into account gross expenditures before a price can be put on the asset, but the beauty of owning a triple net asset is that these expenses are passed through too the tenant. So understanding the average cap rate a product trades at in conjunction with the annual rental income is all you need to come up with a price.
Annul Rental Income / Average Cap Rate = Sales Price.
As discussed in a past article on “What is a cap rate”, cap rates reflects the value of a stream of economic benefits discounted for time and risk.