Medical office building questions

[Xuxuan Liang]

Hi all,

I recently purchased our second commercial building in Webster NY area which has about 6600 sqft. The 2 tenants both decided to stay and has a cap rate of 13% after all expenses, we calc the cap rate using the average income and all expenses(taxes, insruance, snowplowing, maintenance) during the past 3 years. The questions we have right now is about the leases. One of the tenant has a expiring lease on December  but already stated they will be renewing lease with us after we take ownership. Both tenants have been there for over 10 years.  Both leases are now gross modified. 

My questions are as follows. Hope anyone can share some insights with us.

1. Would i be able to do a NNN lease with the tenant when renewing the lease while the other tenant is gross modified?

2. Is it normal to use CPI as rent escalation or a fixed rate? When using the CPI to calculate the rent increase, if i am doing the new lease as of march 2018, do i simply use the rate increased from 2017 march to 2018 march for each year going forward?

3. We want to get a long term lease with the tenant, is there any strategies you experts can share when negotiating the lease with them? 

Thanks in advance!