The Effective Yield Advantage of Absolute Net Healthcare Real Estate

Anchor Viewpoints: July 2026

By Steen Watson, President, Anchor Health Capital

Commercial real estate investors often focus on acquisition cap rates, tenant credit, and lease term. But the lease structure itself can be just as important because it determines who bears operating expenses, capital costs, and long-term property obligations.

That distinction matters in healthcare real estate, where many specialty facilities are mission-critical to the operators who occupy them. Triple net (NNN) and absolute net leases are sometimes discussed together, but they can produce meaningfully different investor outcomes.

Anchor Health Capital’s soon-to-be launched fund will focus on healthcare real estate leased to experienced operators and health systems under long-term absolute net lease agreements. We believe this structure can provide the opportunity for an attractive combination of stable income, operational efficiency, and long-term value creation.

In this edition of Anchor Viewpoints, we examine why absolute net leases may offer a more attractive effective yield than traditional NNN leases—particularly when acquired at similar cap rates.

What Is a Triple Net (NNN) Lease?  

Under a traditional NNN lease, the tenant typically pays property taxes, insurance, and routine operating expenses in addition to base rent. This structure can reduce many landlord expenses and provide protection from operating expense increases.

However, many NNN leases still leave the owner responsible for major capital items such as roof replacement, structural repairs, or building systems. Over time, those costs can reduce cash flow and lower the investor’s effective return.

NNN leases can still provide reliable income and protection from operating expense increases, but they do not fully eliminate ownership-level capital exposure during the lease term.

What Is an Absolute Net Lease?

An absolute net lease transfers a broader set of property obligations to the tenant. In addition to taxes, insurance, and operating expenses, the tenant is generally responsible for capital expenditures, property management, and structural components, including the roof, foundation, and building systems. For investors, that broader transfer can make rental income more predictable and reduce the risk that unexpected capital costs erode returns.

Absolute net leases are particularly relevant for wholly occupied, mission-critical healthcare facilities. These properties are often purpose-built for specialized care delivery and an absolute net lease structure allows the operator to fully control the facility.

Key Differences Between Absolute Net and NNN Leases

Although both lease structures shift many expenses to the tenant, the distinction lies primarily in responsibility for capital and structural costs.

Under a traditional NNN lease, the landlord may still retain responsibility for significant building repairs or replacements over time. Under an absolute net lease, those responsibilities are generally transferred to the tenant.

For investors, the key question is not just the stated cap rate at acquisition, but the yield that remains after expected ownership costs.

Another way to evaluate this distinction is through the lens of an “effective cap rate concept.” Research from Green Street has emphasized that investors should look beyond headline cap rates and evaluate not only the stated acquisition cap rate, but also the expected capital expenditures required to maintain the asset over time. If two properties are acquired at the same cap rate, the NNN-leased asset with an attractive initial yield may produce a lower effective return over time. For specialty healthcare facilities leased on an absolute net basis, a similar entry cap rate to a traditional NNN asset may result in a higher effective yield because fewer owner-funded capital costs reduce the drag on investor cash flow.

The Role of Absolute Net Leases in Healthcare Real Estate

Specialty healthcare facilities—such as inpatient rehabilitation hospitals, ambulatory surgery centers, micro hospitals, freestanding emergency departments, behavioral health facilities, and other purpose-built care settings—are well suited to absolute net lease structures because the operator can fully control the operation of the facility. That operational control can support tenant commitment and long lease terms.

At Anchor Health Capital, we believe this combination—mission-critical facilities, experienced operators, long-term leases, and reduced owner-funded capital obligations—can create a compelling effective yield profile within healthcare real estate.

Conclusion 

Lease structure can materially affect real estate investment performance. While NNN and absolute net leases may appear similar at the headline cap rate level, their effective yields can differ meaningfully once expected capital costs are considered.

For investors, the opportunity is to look beyond the stated cap rate and evaluate how much of that yield is likely to be preserved after capital costs. In our view, specialty healthcare facilities leased under long-term absolute net agreements may offer a differentiated path to durable income and attractive effective yields.

Anchor Health Capital's upcoming Net Lease Fund is focused on investing in high-quality healthcare real estate leased under long-term absolute net agreements to experienced operators. We invite accredited investors to learn more about this offering by contacting us at info@anchorhealthcapital.com.

Disclaimer

The information contained in this document is intended for informational purposes only and is not intended to provide personalized investment advice or to constitute an offer or solicitation to buy or sell securities or interests in any investment. The charts, graphs, and other information contained herein should not serve as the sole determining factor for making investment decisions.

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