Investment Grade Credit Tenant Ratings

Investment Grade Credit Rating Chart Index

The BBB‑ / Baa3 threshold that defines institutional grade credit quality is the same line that separates investment grade from speculative grade tenants, which is why institutional buyers, pension funds, and 1031 exchange investors consistently favor tenants rated at or above this cutoff.

1. Automotive

Summary:
The automotive sector is one of the most internet-resistant categories in net lease investing. Auto parts retailers like AutoZone (BBB), O’Reilly (BBB+), and NAPA (BBB) benefit from immediate, in-person demand that insulates them from e-commerce disruption. At the top of the credit spectrum, integrated energy companies like Chevron (AA‑), ExxonMobil (AA‑), and Shell (A+) anchor fuel and convenience assets with some of the strongest corporate guarantees in the NNN market. Cap rates range from 4.50% on high-credit fuel ground leases to 7.00%+ for franchisee-guaranteed service centers, making this sector relevant across a wide band of investor return targets. For sellers, the depth of institutional and private buyer demand for investment-grade auto tenants means well-priced dispositions routinely close in 30 to 60 days. For 1031 exchange buyers, auto parts stores offer a compelling combination of strong credit, standardized buildings, and price points from $1.5M to $4M that fit a broad range of exchange values. The key underwriting distinction in every automotive NNN deal is the guarantor: a corporate-backed lease from Shell or AutoZone is a fundamentally different asset than a franchisee guarantee from a regional operator. This sector’s credit ratings typically reflect factors such as consumer spending on vehicle repairs and maintenance, fuel and energy demand, and the broader economic climate. Major integrated oil companies, tire manufacturers, and auto parts retailers often maintain comparatively stronger credit ratings, while smaller or more specialized automotive chains may have more speculative ratings.

2. Bank

Summary:
Bank branch properties carry the highest tenant credit quality in the entire NNN market. JPMorgan Chase (A+), Bank of America (A+), Wells Fargo (A+), and TD Bank (A+) all hold ratings at the top of the investment-grade scale, backed by strict federal capital adequacy requirements that no other NNN sector can match. Cap rates for bank NNN typically run from 4.00% to 5.50%, reflecting that premium credit and making these assets a natural fit for investors who prioritize safety of principal over yield. The primary risk factor is the ongoing trend of branch consolidation as banking shifts digital, which means lease term remaining and local market demographics carry outsized weight in underwriting. For owners of bank-tenanted real estate with long remaining lease terms, buyer demand from institutional capital, family offices, and 1031 exchangers remains strong. For buyers entering the sector, the spread between a 12-year Chase ground lease and a 5-year regional bank branch with renewal risk can be 200+ basis points, and understanding that spread is where the real opportunity sits.

3. Big Box / Junior Box / Large Retail

Summary:
Big box and large-format retail tenants anchor the most institutional end of the NNN market. Ground leases to Walmart (AA), Costco (A+), Home Depot (A), and Target trade at some of the lowest cap rates available, typically 4.00% to 5.50%, with lease terms that can extend 25 to 50 years. These are assets that REITs, pension funds, and family offices acquire and hold for generational wealth preservation. Mid-tier credits like Lowe’s (BBB+), Best Buy (BBB+), Kohl’s (BBB‑), and Tractor Supply (BBB) offer higher yields in the 5.50% to 7.00% range while still clearing the investment-grade threshold. Below that line, off-price retailers like TJ Maxx, Burlington, and Ross carry speculative ratings but generate strong store-level performance that keeps cap rates competitive. For sellers of big box assets backed by rated tenants, the buyer pool is deep and national. For 1031 exchange buyers, the sector offers predictable income at scale, though price points (M to M+) mean these deals often require larger exchange values or co-investment structures.

4. Convenience Stores

Summary:
Convenience store NNN properties combine essential-service demand with strong credit profiles at the top of the sector. 7-Eleven (A) leads with one of the highest credit ratings of any NNN tenant and over 78,000 global locations. Circle K, backed by Alimentation Couche-Tard (BBB+), offers broad geographic availability and consistent lease structures. Cap rates for corporate-guaranteed convenience assets typically range from 5.00% to 6.50%, with fuel ground leases on the lower end and building-inclusive deals pushing higher. Many of the strongest regional operators, including Wawa, Sheetz, Casey’s, and Buc-ee’s, are privately held with no public credit rating, which creates a pricing disconnect that informed investors can exploit: unrated does not mean weak credit, it means the market often misprices these assets relative to their actual financial strength. For owners of convenience store real estate in high-traffic corridors, demand from both private and institutional buyers supports efficient dispositions. For 1031 buyers, the sector’s combination of recession-resistant demand, long lease terms, and price points from M to M makes it one of the most liquid replacement property categories in net lease.

5. Dollar Stores

Summary:
Dollar General (BBB) is the single most listed NNN tenant in the United States, with over 20,000 locations and a development pipeline that adds hundreds of new stores annually. Dollar Tree (BBB), including its Family Dollar subsidiary, rounds out the investment-grade end of the sector. Cap rates for dollar store NNN average 6.75% to 7.75%, reflecting solid credit offset by the reality that many locations sit in secondary and tertiary markets where resale liquidity is thinner. The underwriting focus here is lease term and rent-to-sales ratio: a new-construction Dollar General with 15 years remaining and rent well below the store’s revenue is a different risk profile than one with 5 years left in a market where replacement tenants are scarce. For sellers, dollar store properties move quickly due to the sheer volume of investor demand at this price point (M to .5M), which is the sweet spot for individual and small-portfolio 1031 exchanges. For buyers, the sector offers reliable passive income from an investment-grade tenant at a cap rate that meaningfully exceeds what bank or big box assets provide.

6. Drug / Pharmacy

Summary:
The pharmacy sector has undergone significant credit stress in recent years, creating both risk and opportunity for NNN investors. CVS Health (BBB) remains the stronger credit of the two national chains, supported by a diversified business model that spans pharmacy benefit management, MinuteClinics, and insurance through Aetna. Walgreens has faced severe financial headwinds, resulting in store closures, a going-private transaction, and a credit profile that has deteriorated to the point where many locations now trade at cap rates of 7.50% to 9.00%+. CVS properties with long remaining lease terms still command cap rates in the 6.00% to 7.00% range, reflecting the market’s confidence in the underlying credit. For owners of pharmacy real estate, the divergence between CVS and Walgreens pricing creates urgency: CVS assets with 10+ years remaining are selling at a premium, while Walgreens dispositions require careful positioning to attract the right buyer pool. For 1031 buyers, pharmacy NNN offers familiar, highly visible real estate in strong retail corridors, but underwriting the remaining lease term and tenant credit trajectory is more critical in this sector than in any other on this page.

7. Grocery

Summary:
Grocery tenants benefit from the most fundamental demand driver in retail: people need to eat. That baseline demand translates into stable revenues and, for the largest operators, strong credit profiles. Whole Foods, backed by Amazon (AA), and Giant Food Stores, under Ahold Delhaize (BBB), anchor the investment-grade end of the sector. Kroger (BBB) operates the largest traditional grocery footprint in the country. Cap rates for grocery NNN range from 4.50% for Amazon-backed ground leases to 6.50%+ for regional operators with shorter lease terms. Many of the most recognizable grocery brands, including Publix, Aldi, Trader Joe’s, H-E-B, and Meijer, are privately held with no public credit rating, yet their operational strength and market dominance often exceed that of rated peers. For sellers of grocery-anchored NNN assets, the buyer pool skews institutional with strong pricing for long-term, rated-tenant leases. For buyers, grocery NNN provides recession-resistant income with built-in consumer traffic that also benefits adjacent pad sites and outparcels in a portfolio context.

8. Healthcare

Summary:
Healthcare is the fastest-growing NNN sector by tenant count, driven by the structural shift from inpatient to outpatient care and the aging U.S. population. Credit quality spans the full spectrum: hospital systems like Ascension (AA+), University of Michigan Health (AAA), and Piedmont Healthcare (AA‑) carry ratings that rival major banks, while PE-backed dental, urgent care, and physical therapy operators typically sit in the B to CCC range. Cap rates reflect this divide, from 5.00% for investment-grade hospital outpatient buildings to 8.00%+ for single-operator clinics with limited guarantor transparency. Dialysis centers (DaVita, Fresenius), plasma collection facilities (BioLife, CSL), and urgent care platforms (Concentra, CityMD) are among the most actively developed medical NNN formats, each with distinct credit and lease characteristics. For owners of healthcare real estate, institutional buyers, healthcare REITs, and private capital are competing aggressively for well-located medical NNN assets backed by rated health systems. For 1031 exchange buyers seeking recession-resistant income, the sector offers 10 to 15 year NNN leases with annual escalations and a demographic tailwind that strengthens with every year. The critical underwriting question in every healthcare NNN deal is the guarantor: a lease backed by a rated health system is a fundamentally different asset than one guaranteed by a PE portfolio company with layered debt.

9. Restaurants

Summary:
Restaurant NNN properties generate the highest transaction volume of any sector in the net lease market, driven by standardized building formats, broad geographic availability, and a wide range of credit profiles. At the top, McDonald’s (BBB+) corporate-guaranteed ground leases command cap rates of 4.25% to 4.75%, among the lowest in all of NNN. Starbucks (BBB+) trades in a similar band. Mid-tier QSR brands like Taco Bell, Burger King (BB), and Wendy’s offer cap rates of 5.25% to 6.75%, with the corporate-versus-franchisee guarantee distinction driving a meaningful pricing gap within the same brand. Casual dining tenants including Chili’s (BB+), Olive Garden/Darden (BBB), and Applebee’s (B+) carry higher cap rates and shorter remaining terms that appeal to yield-oriented investors willing to accept more re-tenanting risk. For sellers, restaurant NNN properties are among the easiest assets to dispose of due to the depth of the 1031 buyer pool at the .5M to M price point. For buyers, the sector rewards investors who understand the difference between a corporate guarantee backed by a rated parent and a franchisee guarantee backed by an individual operator’s balance sheet. That distinction alone can mean 150 to 250 basis points of cap rate spread on the same brand.

10. Retail

Summary:
“Retail (Other)” This category captures the widest credit spectrum on the page, from AAA-rated Microsoft and AA+-rated Apple and Google to speculative entertainment and specialty retail tenants trading at cap rates above 8.00%. Technology companies with retail or industrial footprints (data centers, distribution hubs, flagship stores) represent trophy NNN assets that rarely trade and command the lowest cap rates in the market when they do. Shipping and logistics tenants like FedEx (BBB) and UPS (A‑) anchor the industrial end with long-term leases on distribution and retail service facilities. On the speculative side, entertainment tenants (AMC, Cinemark, Chuck E. Cheese) and specialty retailers (GameStop, Guitar Center, Rent-A-Center) carry elevated risk but offer correspondingly higher yields for investors with the expertise to underwrite tenant viability and lease rollover. For sellers of properties leased to high-credit tenants in this category, the buyer pool is institutional and pricing is aggressive. For buyers evaluating speculative-rated tenants, the opportunity lies in identifying operators whose business fundamentals are stronger than their credit rating suggests, a niche where informed representation and deep tenant intelligence create a measurable advantage.

Disclaimer: This information is provided for general reference only and does not constitute investment advice. Credit ratings are subject to change; always refer to the latest reports from S&P, Moody’s, or other reputable agencies for the most current ratings. Many of the tenants listed above also issue investment grade bonds that trade in the corporate bond market on the same underlying credit.