If base rent looks cheap, is the grocery lease a bargain?
Not until you add taxes, insurance, CAM, and any roof or lot reserve. Grocery often pays a large share of the strip. Occupancy is the stack, not the base line on page one.
Triple net (NNN) — A lease structure in which the grocery tenant pays real-estate taxes, building insurance, and maintenance on top of base rent. In a strip center those nets usually arrive as CAM plus tax and insurance bills. A “cheap” base can be expensive once the stack is occupancy.
Abstract the lease before you argue the multiple. Grocery Store Business Broker — HedgeStone Business Advisors, led by Jason Taken — reads NNN as a cash stack, not as a real-estate slogan. Book a confidential intro when you have the last two CAM recons and the remaining term on one page.
Occupancy is rent plus the nets
Write one number: base rent + NNN + CAM + any required reserves. Then divide by sales. What is a reasonable rent-to-sales ratio is the occupancy question. The rent-as-percent-of-sales checker is the worksheet. FMI’s 2.1 percent average net profit for food retailers in 2025 is channel context that grocery is thin. Occupancy that looks fine on base rent and ugly on the stack will not leave room for that thin net.
A below-market related-party rent juiced SDE and will reverse when a stranger is the tenant. Recast to market occupancy, including the nets the landlord will actually bill. Lease due diligence and how to evaluate the lease are the reading order.
Grocery as the strip’s expensive tenant
Independent grocers often pay a large pro-rata share because they are the traffic box. When a co-tenant leaves, that share can jump. A co-tenancy clause is how some leases give the grocer a remedy. An exclusive-use clause is how the grocer keeps a dollar store from becoming a second food file. Neither clause is NNN. Both change whether the NNN bill is survivable.
Lease assignment is the other close condition. A landlord who will not assign will not care that you underwrote the stack beautifully. Remaining term under two years without options is a price cut, not a footnote on the NNN page. Selling with a lease versus real estate is the owned-box fork. If the seller owns the dirt, recast the store on market NNN rent, then value the building separately.
Roof, lot, and CAM true-ups
Ask who replaces the roof, who mills the parking lot, and whether those jobs are CAM, a reserve, or a surprise assessment. Grocery HVAC and refrigeration already eat cash. A new lot in year two is how a “clean” recast becomes a bad year. Pull the last two CAM reconciliations. A recon that jumped after a co-tenant left is a diligence item, not a story you hear at the first true-up.
Caps matter. An uncapped CAM in a tired strip is a blank check. A cap that excludes taxes and insurance is a cap that excluded the parts that move. Write what is inside the cap on the abstract.
If the file is a strip NNN, bring the lease, the recons, and sales. Book the occupancy conversation. The hour is for the stack, not for a base-rent rumor that the grocery is cheap to house.
Worked math for Triple-net grocery lease reading
These figures are a teaching walk-through for Triple-net grocery lease reading, not a quote and not a sold comp. Order of operations: weekly sales, recast SDE, inventory at cost, then a multiple band.
| Input or output | Illustrative figure |
|---|---|
| Weekly sales (illustrative) | $195,000 |
| Annual sales | $10,140,000 |
| Recast SDE | $365,040 (3.6% of sales) |
| Inventory at cost | $563,333 (~18 turns) |
| Occupancy check | $365,040 / year (3.6% of sales) |
| Low going-concern | $1,293,413 at 2.00x SDE + inventory |
| High going-concern | $1,713,209 at 3.15x SDE + inventory |
| Sketch DSCR on a note | 1.49 |
If weekly sales or shrink move 8 percent, the SDE and the note move with them. That is why Jason Taken starts with scan data and the lease, not with a neighbor's rumor multiple.
Book the intro call with your side of the table ready: seller files or buyer capital. The calendar is the only next step.