When getting ready to purchase a NNN lease property, will the pro forma be different from the actual NOI?

Only dealing with Absolute NNN/ NNN leases. and canthis info be obtained before submitting a letter of intent/offer?
In Buying Property - Asked by Scott F. - Oct 22, 2009
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Answer(s)

Gregory G.
Broker/Agent
San Francisco, CA

Depends on the Deal Scott. Pro-forma is usually what the property is capable of doing. Yes it can be obtained and should be in the marketing package. An Example would be the Blockbuster we have for sale:
http://www.gregorygarver.com/blockbuster.pdf
More NNN listings here:
http://www.gregorygarver.com/san-francisco-real-estate-listings.html
Hope this helps,
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com
http://www.gregorygarver.com

Oct 22, 2009
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Kevin D.
Broker/Agent
Cincinnati, OH

If it's less than 100% occupied, or the Einstein that put the proforma together thinks that the rents are too low then there will be a difference. In any case the GOI and NOI for a 100% occupied NNN investment should be the same figure.
Don't trust proforma's they don't mean anything other than someones over inflated opinion, evaluate the accutal nubers/preformance.

Oct 22, 2009
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Chris L.
Property/Asset Manager
Newport, DE

Due diligence is the key. Match the expenses to the reimbursements. All should be equal. You need to be careful as the NNN term is tossed around a little too casually these days. You can verify the expense/reimbursement quickly with the listing agent/owner before making the offer/loi. A well prepared offer should allow you the opportunity to conduct the appropriate due diligence. The LOI should put forward the same opportunity. Allow yourself the time to do your homework...oh yeah, and get a good agent to represent YOUR interests.

Oct 22, 2009
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Paul S.
Broker/Agent
Glendora, CA

If the NNN lease is already in existence the future rent should already be determined? If the lease term ends soon, it may be the market rents are higher today. In that case proforma may be useful? That said, in today's economy even a lease that is already in existence may get renegotiated in the future. Many tenants are suffering from the slow economy and leases negotiated at high lease rates are simply not sustainable. If the lease started a few years ago it is very likely today's lease rate will be a lot lower. Tenants are going to landlord's and negotiating lower rents. The alternative for many landlord's is not good in that the tenant may file bankruptcy if the rent is not lowered. By lowering the rent the value of the asset goes down as well. Many property owner's equity has evaporated, some below the loan amounts on the property. As mentioned in other answers, beware of proforma rents. Have a look at what the property would rent for if the existing tenant was gone (lenders do that now in determining loan amounts) and use that as your proforma.

Oct 22, 2009
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