Investment grade is a credit rating of BBB- or higher from S&P (Baa3 or higher from Moody’s), signaling lower default risk.
Investment-grade ratings are widely used as shorthand for credit strength. A rating of BBB- or higher from S&P, or Baa3 or higher from Moody's, indicates lower default risk than a non-investment-grade rating, sometimes called high yield. Investment-grade tenants in NNN deals usually trade at lower cap rates and attract more lenders. A rating describes the company that is rated, so verify that the lease or guarantee is actually backed by that entity.