Question on Triple net lease

I am new fella in this business, came across a sale for lease of 0.62 acre building to Wendys. Following are the details

  1. Sale price 1.9million
  2. Rent 115,000 per annum with 10% increase every 5 years
  3. Leased for 20 years
  4. Cap rate 5.85%
  5. currently Wendys is paying half rent and will start paying full rent after construction (March 2006)
  6. Triple net lease with no owner responsibility
  7. Co-Broker fee 2%

Is this a good deal, personally I feel it is little overpriced as the cap rate is very low. If I invest the same amount of money I will get a good return, maybe around 10%.
If I want to look into this to negotiate a price, what are the things I should be concerned with. I am completely new to this field, so any help in this regards will be greatly appreciated.

Thanks in advance

By their nature, triple net properties have low cap rates. There is no maintenance, taxes or other managment headaches. So they are a very solid investment to add to your portfolio but don’t expect huge cash flow with a triple net property.

Some other things to look into:

  1. What is the credit rating of Wendy’s? How solid are their financials? Are they BBB- or better?

  2. Have you reviewed the lease? Are there any loopholes?

Patti Porter