Single Tenant Net Lease deal

[Mark Devereaux]

My wheelhouse is single family and multifamily properties.  I am looking to get into smaller commercial net lease properties.  The theory is to trade some of our built up equity for less intensive management.  This deal came across my desk a couple days ago.  I'm looking for good feedback and questions/concerns I should be raising.  The biggest concern I have is spelled out at the end of this post regarding the Lessee right to purchase during the term of the lease.  What do you guys think?  Are there better deals in commercial?  Thoughts, opinions welcome.  Here to learn.  Thanks 

List Price: $350,000

Advertised cap: 8.2%

Monthly rent: $2440.00

NOI: $28,740

Lease expiration:  June 20, 2020

Renewal options:  One, 5 year option remaining with rent escalation to $2600.00 per month

Tenant:  Single building; single tenant; Large Michigan based pizza, orange color; franchisee with 10 locations; not corporate

Sq feet:  3960       Year built:  1979

Lease type: NNN

Highlights:  National brand, retail corridor, 4 lane highway main road frontage, adequate visibility, signage and parking.  Surrounding retailers include Meijer, Home Depot, Family Farm & Home, McDonalds

** Haven't got a full copy of the lease yet; looking at the 7th amendment of the lease; current lease option is up June, 2020, option remaining is until June 30, 2025.

** Lessor agrees to reimburse Lessee $4664.00 for 1/2 the cost of HVAC unit

**  Lessee shall have the right and option to purchase the premises at any time during the lease; current price through 2020 is $419,000.00

I like the property for the location, the size of the building isn't overwhelming.  Not sure this is the highest and best use of the property, and I think I could lose out on possible re-development or re-sale opportunity with the Lessee right and option to purchase clause.

What say you?