Which NNN looks better?

[Maria Lafrance]

Currently deciding between 2 NNN properties, both in the midwest and would love to know which you'd choose and why.

1) Starbucks on a rural exit of a major interstate. High visibility from the exit, new construction with single drivethrough window and about 2000 sf interior with seating area (typical current size). LL is responsible for roof and structure. Cap rate of 6.5, 8 years left on initial lease with 2 options. Rent increases 10% every 5 years. Next door to a gas station and KFC. The gas station next door is uphill and could present an environmental issue down the road. Rural location in slow growth town, but the interstate is a steady supply of traffic.

2) Veterinarian/animal hospital, about 8000 sf built in 2000. National large corporate sponsor. Just exercised 2nd 5-year option of long term lease (5 years left) with one option remaining. 2% annual increases. Landlord responsible for foundation and structure. Tenant responsible for roof, HVAC and parking lot and all else. This property is on a former junkyard, and has had prior phase I and II soil testing done and has passed and has a letter from the state saying no further action needed, but still could be a concern. Attractive location near retail, restaurants, apartments and Target, growing affluent suburb. 

Assume all other factors are the same (not in flood plane, tenant strength & reputation, tenant responsibilities). Thank you

[John McKee]

As long as you have the studies done and they have passed it's no big deal.  I own both a starbucks and a vet center so I can speak to these kind of tenants.  How much acreage do each of these properties have?  In other words is there room for future development or better use. The key question to ask yourself is if the tenant goes dark, can i rent this space right away!  Buy the location, not the tenant.   Traffic Counts and demographics matter.  Usually Starbucks get's it right, but they are known for closing stores as well.  Having a drive thru adds value for the property as well.