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Triple-net leased property portfolios and operational efficiency: Evidence from the U.S. REIT market

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  • Allen, Marcus T.
  • Huerta, Daniel E.
  • Weeks, H. Shelton
  • Wright, Jesse T.

Abstract

Triple-net leases are legal agreements by which tenants, beyond rent payments, are responsible for operating expenses such as real estate taxes, insurance, and maintenance costs. We examine the relative operational efficiency of Real Estate Investment Trusts (REITs) holding property portfolios consisting of majority triple-net leases. Results suggest REIT holding triple-net leased portfolios are more operationally efficient than their counterparts. Our results suggest that selecting proper lease expense provisions specifying who carries the obligation of operating expenses is a determining factor of REIT operational efficiency.

Suggested Citation

  • Allen, Marcus T. & Huerta, Daniel E. & Weeks, H. Shelton & Wright, Jesse T., 2024. "Triple-net leased property portfolios and operational efficiency: Evidence from the U.S. REIT market," Finance Research Letters, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324005749
    DOI: 10.1016/j.frl.2024.105544
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    References listed on IDEAS

    as
    1. Joseph R. Nicholson & James A. Stevens, 2022. "REIT Operational Efficiency: External Advisement and Management," The Journal of Real Estate Finance and Economics, Springer, vol. 65(1), pages 127-151, July.
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    7. Agarwal, Sumit & Ambrose, Brent W. & Huang, Hongming & Yildirim, Yildiray, 2011. "The Term Structure of Lease Rates with Endogenous Default Triggers and Tenant Capital Structure: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(2), pages 553-584, April.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Triple-net leases; REIT efficiency; Operational efficiency ratio; REIT portfolio management; REIT managerial efficiency;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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