Absolute NNN with 9.5% Cap - How is it on the market?

8 Replies

I found a 9.5% Cap Absolute NNN for sale. The tenant is "top tier" according to the listing. "The tenant is subject to a 5 year absolute NNN lease with zero landlord obligations. The lease calls for annual 2% rental increases and two, 5 year options to renew."

My question is: how did this make it to market? Most commercial investors I know look for 8%+ and with 0 landlord responsibilities, it feels like the type of thing an investor would jump on quickly. Is there something more I should be looking at?

How much of the original lease is left?

If they are near the end of the original lease, have they executed the first (or next) option?

What type of building (i.e...office, stand alone, bank, etc...) and what/who is the franchise/tenant?

It doesn't say how long into the lease it is.

It's an office building with a tenant in A/V industry.

Originally posted by @Joe Villeneuve :

How much of the original lease is left?

If they are near the end of the original lease, have they executed the first (or next) option?

What type of building (i.e...office, stand alone, bank, etc...) and what/who is the franchise/tenant?

 

Originally posted by @Spencer Carpenter :
It doesn't say how long into the lease it is.

It's an office building with a tenant in A/V industry.

Originally posted by @Joe Villeneuve:

How much of the original lease is left?

If they are near the end of the original lease, have they executed the first (or next) option?

What type of building (i.e...office, stand alone, bank, etc...) and what/who is the franchise/tenant?

 

Where the tenant is in the lease/extensions will probably be where you'll find your answer.  If you want to know,...find out.

 

@Spencer Carpenter could be one of those things where the listing looks good but when you dig below the service they don’t have the financials to back up any of the claims and so they can’t get the price they want for it.

Thanks for the insight!

Originally posted by @Joe Villeneuve :
Originally posted by @Spencer Carpenter:
It doesn't say how long into the lease it is.

It's an office building with a tenant in A/V industry.

Originally posted by @Joe Villeneuve:

How much of the original lease is left?

If they are near the end of the original lease, have they executed the first (or next) option?

What type of building (i.e...office, stand alone, bank, etc...) and what/who is the franchise/tenant?

 

Where the tenant is in the lease/extensions will probably be where you'll find your answer.  If you want to know,...find out.

 

 

That's a pipe dream. Developers build for cost at a 9 to 10 cap and sell for a 5 cap to 6 cap usually. There are certain asset types that are less cap and more higher cap rate but nothing in the 9's

I review about 1,000 NNN properties a week for clients nationally.

This could be a LEASEHOLD where you only own the building and not the land. Tenant goes dark and now you have 2 mortgage payments for the building and the land. Lenders do not like those at all and most are cash purchases. They want land owner rights to be subordinate to the loan on the building itself.

If I looked at the flyer or OM I could tell in under a minute what is wrong with it.

Now if it's a turn around deal with lease up etc. that is different. It could also be an auction property stating starting bid is 9.5 cap knowing it will be bid up way higher. Lots of reasons.

It's hard to find 6 caps these days for investment grade tenant with enough remaining on primary lease term to get a good loan.