Net Lease Tenant Review: Shell Oil
Shell Oil net lease properties offer investors the opportunity to purchase well located assets with strong brand recognition and product offerings. There are roughly 25,000 Shell-branded gas stations across the U.S., providing visible public presence for the market leader. Shell's parent, Royal Dutch Shell, remains one for the top three petroleum companies worldwide.
Note that Shell tends not to operate their actual convenience stores / gas stations; rather they prefer to sign marketing agreements with various distributors and operators across the country. For the net lease investor, this means that there are a wide variety of lease types with varying strength of lease guaranties. Some of the more popular net leased Shell locations in the national market have been backed by regional distributors, offering a large corporate guaranty signed to a 15 - 20 year absolute NNN lease. One upside to these leases is that they offer fee simple ownership of the land and building, giving the landlord significant depreciation as gas station properties are allowed to use an accelerated 15-year depreciation schedule for the building versus a typical commercial depreciation schedule of 39 years. Further, Shell net leased investments offer rental increases in the primary term, with annual increases of 1.25% - 3.00%, or 5-year increases of 8.00% -15.00%.
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