NNN character Refinance

NNN character Refinance

Refinancing a NNN character has a few intricacies that set it except the typical commercial loan refinance. Corporate guaranteed leases (among other strengths) have attracted many noticeable capital supplies to this arena. However, due to special use character of many NNN buildings (For example a fast food restaurants, drug stores, etc) and that many similarities contain a single tenant, lenders can be careful. This without of tenant (and income) diversification and the special use characteristics creates increased risk for the lender in case of default.

Currently (as of 12/07) credit supplies for NNN similarities are becoming more and more conservative within this category due to the “credit crisis”. Many lenders within this category have simply stopped lending on NNN similarities.

Below is a fleeting underwriting discussion on what to expect if you are currently considering or conducting a nnn character refinance.


Loan to value, meaning the value of the character versus the loan amount, seldom go beyond 65% and is commonly capped at 60% within the NNN category. However exceptions are made with this. An example would be with strong corporate guaranteed leases.


Debt Service Coverage Ratio restrictions are typically capped at a comparatively low 1:1.10. Meaning that for every $1.10 of net income the character produces the mortgage payment will not go beyond $1.00. Said in another way, after all expenses and mortgage has been paid, the owner needs to net at the minimum $.10 to qualify.

Exceptions can be made with this in addition. It is not unheard of for major drug store occupied similarities to qualify for DSCR as low as 1.03.

Tenant Evaluation

Much examination goes into evaluating tenant’s strength. Lenders examine the tenant’s financial position, time left on the current lease and other applicable information. The time remaining on the current lease is of particular concern on a NNN character refinances. Many edges/ lenders will not allow the fixed period of the loan to extend the remaining term of the lease. Some traditional edges will not allow the loan amortization period to go beyond the length of the lease.

character examination

Market value and market rent will be evaluated and compared to the subject character. Age, turn up, location, accessibility, and local market conditions, in addition as other factors are considered.

Credit Worthiness

The personal credit worthiness of the borrower will often be checked. Business performance and credit rating will be heavily evaluated as this is one of the meaningful elements of underwriting.

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