Apollo Just Bet $1 Billion on Net Lease — Here’s the Lease Structure Breakdown Every Investor Needs

When Apollo Global Management announced a $1 billion joint venture with Realty Income in March 2026, the net lease market took notice. The deal — covering roughly 500 single-tenant retail properties under long-term net leases — was framed by Realty Income’s CEO as “a template for a multi-billion-dollar, programmatic co-investing relationship.” That kind of institutional conviction doesn’t happen by accident. It happens because sophisticated capital understands exactly which lease structures generate bond-like income with minimal landlord friction. If you’re evaluating net lease investments — whether for a 1031 exchange, a family office portfolio, or a REIT allocation — understanding the spectrum from gross leases to absolute NNN lease structures is the foundation of every smart decision you’ll make.

Why Net Lease Lease Types Are Driving Record Capital Flows in 2026

The structural advantages of net leases — not the real estate itself — are what institutions are buying.
Apollo, through managed funds and affiliates, committed $1 billion for a 49% interest in a Realty Income joint venture owning a portfolio of single-tenant retail properties with long-term net leases.
That transaction didn’t happen in a vacuum.
Transactions of single-tenant net lease retail assets improved markedly in 2025 after higher interest rates weighed on trading in prior years, with private investors driving both individual property sales and portfolio deals higher.
Meanwhile,
single-tenant net lease property supply declined 9.8% quarter-over-quarter in Q1 2026, driven by elevated transaction volume in Q4 2025 and continued deal activity in the first quarter, with retail bid-ask spreads narrowing to 23 basis points.

The through-line connecting all of this capital activity is lease structure. Investors at every level — from $1 billion JVs to $1 million 1031 exchanges — are selecting assets based on how the lease allocates risk and expense. Here is precisely how each structure works.

Gross Lease vs. NNN Lease Types: The Fundamental Divide

The core distinction in commercial real estate leasing is whether the landlord or tenant absorbs operating expenses. In a gross lease, the landlord bears nearly all property costs. In a net lease, those costs shift — partially or fully — to the tenant. That shift is what creates the “passive income” premium that drives NNN demand.

Gross Lease

A gross lease is the standard lease many property owners and tenants sign, where the only thing the tenant is responsible for is the rent, which is a predetermined, fixed amount each month during the lease term.
The landlord covers property taxes, insurance, maintenance, and often utilities. For investors, this means higher gross rents — but those rents must absorb unpredictable operating costs. Gross leases are common in office and multi-tenant retail. For single-tenant net lease investors, they represent the highest-management, highest-variance end of the spectrum and are rarely the target structure.

Modified Gross Lease

A modified gross lease splits operating expenses between landlord and tenant through negotiated terms — some costs go to the tenant (often utilities and janitorial), while others (roof, structure, taxes) stay with the owner. It is a hybrid that offers more investor control than a pure gross lease but less passivity than a true NNN. Modified gross structures appear frequently in medical office and flex industrial deals but are not the dominant structure for freestanding single-tenant retail investing.

Breaking Down NNN Lease Types: NN, Triple Net, and Absolute Net

Within the net lease family, three distinct structures define most of the single-tenant investment market. Each transfers a different slice of expense responsibility to the tenant — and each carries a different cap rate, risk profile, and management burden for the investor.

Double Net (NN) Lease

In a double net lease, the tenant pays the rent, the property taxes, and the liability insurance.
The landlord retains responsibility for structural and roof repairs, as well as common area maintenance where applicable. NN deals typically price at higher cap rates than true NNN properties, reflecting the residual landlord obligations. They are common in older retail assets and smaller regional tenants where full NNN structures are harder to negotiate. For investors who want some exposure to net lease economics but are comfortable absorbing maintenance risk in exchange for yield, NN properties can offer attractive entry points — particularly in secondary markets.

Triple Net (NNN) Lease

In a standard triple net lease, the tenant pays rent, taxes, insurance, and maintenance, but the landlord typically retains responsibility for the roof and structure.
This is the most prevalent structure in the single-tenant investment market and the one most commonly referenced when investors say “NNN.”
The single-tenancy status and triple net lease structure greatly simplify expense management and rent collection into essentially a monthly payment from one party, and this simplicity, paired with lease terms that can extend for a decade or more, makes these assets appealing for retirement and estate planning purposes.

Cap rates on NNN deals vary meaningfully based on tenant credit and lease term.
The average cap rate on tenants with higher credit has trended to the mid-5% range, the mean cap rate on mid-tier credit tenants has risen modestly to the high-6% zone, and for tenants with lower credit standings, the average cap rate has been in the 7% band.
Lease term compounds these spreads:
properties with fewer than five years on the lease trade at an average cap rate of 7.7%, that yield dips to 6.8% for five-to-fifteen year terms, and for terms longer than 15 years, the average cap rate was 6.1%.

The dominant buyers in this segment remain private investors. To read more NNN analysis on the Triple Net Direct blog covering cap rate breakdowns by tenant tier, the research is updated regularly as market conditions evolve.

Absolute NNN (Absolute Net) Lease

In an absolute NNN lease, the tenant assumes all costs including structural repairs, making it the most landlord-passive structure available.
The investor collects rent and has zero property management obligations — no roof, no HVAC, no parking lot.
An absolute net lease is one in which the tenant pays the landlord a fixed monthly rent but also pays for all expenses of the property and daily operations of the business.

A bondable lease goes even further, including no termination rights for the tenant, creating bond-like cash flow certainty — and both absolute NNN and bondable leases command lower cap rates (higher prices) due to their reduced landlord risk.
In practical terms, a McDonald’s or a Dollar General on an absolute NNN structure with a 15-year corporate lease term will price more aggressively (lower cap rate) than the same building with a standard NNN structure and a shorter lease — because institutional buyers assign real economic value to the complete elimination of landlord obligations.

Most absolute net leases are with credit or national tenants that carry a corporate guaranty, meaning the investor receives a rent check each month regardless of sales at that specific location, and absolute net leases are typically used in sale-leaseback agreements.
For investors deploying 1031 exchange capital under time pressure, that certainty has compounding value.
1031 exchange investors are finding that absolute net leases are a great long-term investment.

NNN Lease Types Compared: A Side-by-Side Investor Framework

Understanding how these structures stack up on the dimensions that matter most — expense responsibility, management intensity, cap rate range, and typical tenant profile — allows investors to match lease structure to their specific goals. Here is a direct comparison:

• Gross Lease: Tenant pays base rent only. Landlord covers taxes, insurance, maintenance, and structure. Highest management burden. Rare in single-tenant freestanding investing. Cap rates typically reflect the operating cost load.
• Double Net (NN): Tenant covers rent, taxes, and insurance. Landlord retains structural and roof obligations. Moderate management burden. Common in older retail and smaller regional tenants. Priced at a cap rate premium to NNN.
• Triple Net (NNN): Tenant covers rent, taxes, insurance, and maintenance. Landlord retains roof and structure. Low management burden. The market standard for investment-grade freestanding retail. Cap rates range from mid-5% to 7%+ based on credit and term.
• Absolute NNN: Tenant covers all costs including roof, structure, and rebuilding obligations. Zero landlord obligations. Maximum passivity. Typical with investment-grade corporate tenants in sale-leaseback and build-to-suit contexts. Commands lowest cap rates due to reduced risk.

The net lease market remains bifurcated between investment-grade credit assets with long lease terms — which continue to attract institutional buyers, 1031 exchange capital, and private investors — and shorter-term or non-rated assets, which face wider spreads and more selective buyer engagement.
The lease structure is one of the key variables determining which side of that bifurcation a given asset falls on. To view available NNN deals spanning the full spectrum from NN to absolute net structures, current listings reflect live market pricing across multiple tenant categories.

How Institutional Buyers Are Using Net Lease Lease Structures in 2026

The Apollo-Realty Income transaction is instructive beyond its headline size.
Realty Income’s president and CEO described the partnership as a template for “a multi-billion-dollar, programmatic co-investing relationship.”
That language signals a systematic, repeatable deployment of capital into NNN-structured assets — not a one-time opportunistic trade.
Net lease assets are attracting more institutional capital, with analysts noting that this resilient, tax-efficient investment strategy is gaining favor.

NNN REIT (NYSE: NNN), one of the most data-rich benchmarks in the sector, illustrates the performance characteristics that large capital seeks.
NNN increased portfolio occupancy to 98.6% in Q1 2026, an increase of 90 basis points over the prior year period, with a portfolio weighted average remaining lease term of 10.1 years.

For 2025 as a whole, NNN closed on $931.0 million of investments at an initial cash cap rate of 7.4%.

NNN is one of only three publicly traded real estate investment trusts to have increased annual dividends for 36 or more consecutive years
— a record made possible precisely by the stability that triple net lease structures produce at scale.

For private investors, the implications are direct: the same lease structures that generate 36 years of consecutive dividend increases for an institutional REIT are available in individual asset form at sub-$3 million price points. The structure is the same. The passivity is the same. What changes is the entry check size.

Which NNN Lease Type Is Right for Your Portfolio?

Lease structure selection is ultimately a function of three investor-specific variables: yield target, risk tolerance, and desired management intensity. Here is a practical framework:

• Maximize passivity, accept tighter yield: Pursue absolute NNN or bondable structures with investment-grade corporate tenants and 15+ year terms. McDonald’s, Starbucks, and major QSR brands on build-to-suit absolute leases are the gold standard. Expect cap rates in the mid-5% to low-6% range.
• Balance yield and passivity: Standard NNN with investment-grade or strong franchisee tenants, 10–15 year terms. Dollar General, AutoZone, Tractor Supply, and similar essential retail operators are core targets. Cap rates in the high-5% to mid-6% range.
• Maximize current yield, accept some management: NN structures or shorter-term NNN deals with mid-tier credit tenants. Cap rates in the 6.5%–7.5%+ range. Requires more active underwriting and a higher tenant credit due diligence standard to compensate for the residual landlord obligations.
• 1031 exchange priority:
  The top net lease tenants for 1031 exchanges in 2026 are dollar stores, pharmacies, grocery and necessities retailers, fast food operators, and auto and essential retail, which remain top choices due to long-term NNN stability and passive-income appeal.

Connecting with a specialist advisor before committing to a structure is the highest-leverage step in the process. To connect with a specialist advisor who can match your capital profile to the right lease structure and tenant tier, that conversation is where portfolio strategy becomes actionable.

Frequently Asked Questions

What is the difference between a NNN lease and an absolute NNN lease?

In a standard NNN lease, the tenant covers rent, taxes, insurance, and maintenance, but the landlord typically retains responsibility for the roof and structure. In an absolute NNN lease, the tenant assumes all costs including structural repairs and rebuilding, eliminating every landlord obligation. Absolute NNN structures command lower cap rates because they carry less investor risk.

What is a gross lease and why do NNN investors avoid it?

A gross lease requires the tenant to pay only base rent while the landlord absorbs all operating expenses — taxes, insurance, maintenance, and repairs. NNN investors avoid gross leases because they introduce unpredictable operating costs that erode net income, create management obligations, and reduce the passive-income character that defines single-tenant net lease investing.

How does lease structure affect the cap rate on a NNN property?

Lease structure directly impacts cap rate pricing. Absolute NNN and bondable leases — where the tenant bears all obligations — compress cap rates (raise prices) relative to standard NNN. Double net properties price at a cap rate premium to NNN because the landlord retains structural risk. In 2026, investment-grade NNN assets trade in the mid-5% to mid-6% range, while NN and shorter-term deals can reach 7%+.

Which lease type is best for a 1031 exchange into net lease?

Standard NNN and absolute NNN leases are the most common 1031 exchange targets because they pair long initial lease terms — typically 10 to 20 years — with minimal landlord responsibilities. The 45-day identification clock demands deal certainty; corporate-guaranteed absolute NNN structures with national tenants provide the cleanest path to closing without surprises.

What lease structure do REITs and institutional investors prefer?

REITs and institutional investors overwhelmingly target triple net and absolute NNN leases with investment-grade corporate tenants and weighted average lease terms of 10 years or more. NNN REIT’s Q1 2026 portfolio — 3,711 properties at 98.6% occupancy with a 10.1-year average lease term — illustrates the institutional preference for long-duration, low-obligation NNN structures at scale.

Is a double net (NN) lease a good investment?

A double net lease can be a sound investment when priced correctly. The landlord retains roof and structural responsibility, which introduces some management exposure, but NN properties typically offer higher cap rates than comparable NNN assets to compensate. They work well for investors who prioritize current yield and are comfortable handling periodic structural capital expenditures as part of their return profile.

Bottom Line

Apollo Global Management’s $1 billion bet on Realty Income’s NNN portfolio in March 2026 is a masterclass in what institutional capital already knows: lease structure is the product. The spectrum from gross to absolute NNN defines your management burden, your cap rate, your 1031 suitability, and ultimately your passive income durability. With STNL transaction volume running 18% above 2024 levels and Q1 2026 supply tightening, investors who understand these structures have a genuine edge. View available NNN deals on Triple Net Direct to see how current pricing maps across the full lease structure spectrum.

Sources

• Apollo To Invest $1B In 500 Realty Income Single-Tenant Properties — Bisnow
• NNN REIT, Inc. Announces First Quarter 2026 Results — NNN REIT, Inc.
• NNN REIT, Inc. Announces 2025 Annual Results and Initial 2026 Guidance — NNN REIT, Inc.
• 2026 Single-Tenant Net Lease Retail Report — Marcus & Millichap
• Single-Tenant Net-Lease Research Brief — Marcus & Millichap
• Net Lease FAQ: NNN, Cap Rates & 1031 Exchanges — The Boulder Group
• Net Lease Market News & Research — The Boulder Group
• Absolute Net Lease Properties — Avison Young