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
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Rob B.
Chandler, AZ

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
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Marty H.
Lenexa, KS

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
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