Co-Tenancy, Go-Dark & Re-Leasing Risk
Multi-tenant and single-tenant NNN assets carry lease-clause risks the OMs may not surface. Co-tenancy clauses let a tenant cut rent or terminate if an anchor leaves; go-dark clauses let a tenant cease operations while still paying rent (a vacant but paying store still loses value); and at lease expiration, re-leasing carries real costs (tenant improvements, free rent, broker fees, downtime). These risks are most acute at Carrollton Station (5 tenants, ~5-yr WAVG term) and wherever a single tenant could vacate.
Key Points¶
- Co-tenancy: a tenant may reduce rent or leave if a key anchor (e.g., Five Guys) departs.
- Go-dark: operations cease but rent continues — property value still suffers.
- Re-leasing costs: $50–$150+/SF TI for medical/dental; 6–18 months downtime; 4–6% broker fees.
- These appear in actual lease documents — the four property leases still need to be requested from Mike.
- Concentration limit: Mike caps weak mom-and-pop tenants at ~15–20% of leasable area so one failure does not sink the income stream (see tenant financial due diligence).