I am looking for options to a 20 year lease re;escalation

National chain wants 2.5% going out 20yrs. We feel it is too low, after 10 years. He will not ageree to CPI plus. Any creative suggestions. We are already rock bottom on lease rate/taxes
In Leasing Property - Asked by doug s. - Oct 11, 2010
Report Abuse
Answer this Question

Answer(s)

Rob B.
Chandler, AZ

Doug....
Most NNN, National Chain Restaurants are willing to pay from 1% per year, to 7.5%-10% every five years. If you are saying the chain is willing to pay 2.5% per year you are in good shape. If you are saying that you have to wait 20 years for a 2.5% increase, as they say on the "Deal or No Deal" program...... NO DEAL!!!! With that kind of lease you would really paint yourself into a corner on any kind of eventual resale.
Rob Baird, CA RE Lic. #544165 (One of the oldest, active licenses in CA)
951 515-5855

Oct 12, 2010
Report Abuse
Marty H.
Broker/Agent
Lenexa, KS

Doug...
Give us more details so we can better understand the situation. In general, I'd jump all over a 2.5% annual increase. However, if its 2.5% after 10 years you have a problem. Is this going to be a pure NNN lease or will you retain some repair responsibility? If you retain repair responsibility I can pretty well guarantee you that the cost of repairs will steadily increase over the next 10 years. When you say 2.5% going out 20 years are you saying that they will sign a lease with a 20 year base term, or is this a shorter base term with renewal options that may or may not be excercised?

Oct 22, 2010
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question