Tenant Financial Due Diligence (Credit Verification)
How a buyer verifies the financial strength of the tenant (and guarantor) behind an NNN lease. The depth of available information falls along the same spectrum as the credit tier framework: corporate and franchise tenants disclose extensively, while mom-and-pop operators reveal far less. Mike's June 24, 2026 guidance sets out the practical toolkit for verifying operator-level credit when balance-sheet data is thin.
Sources of Tenant Financials¶
- Lease disclosure right — many leases let the landlord request tenant financials once per year. If the Seller has not already collected them, the buyer can require the Seller to obtain them during the due-diligence period.
- Disclosure provision is not guaranteed — some leases include no tenant financial disclosure requirement at all, making financials hard to obtain. Mike advises caution with mom-and-pop tenants unless the lease has a clear disclosure provision.
- Informal reputation signals — when financials are unavailable, gauge a local business's health through Yelp, Google Business, Instagram, and Facebook: ratings, review volume, and market presence within the immediate trade area. Not an exact science, but a useful health indicator.
- Best practice — couple online reputation signals with actual financials to truly understand a tenant and its business.
Concentration Guideline¶
- Mike is not comfortable with mom-and-pop tenants occupying more than roughly 15–20% of an asset's leasable area. Above that, a single weak operator's failure materially threatens the income stream — a direct link to co-tenancy and re-leasing risk.