8% cap rate is a good rate in todays market place for triple net properties. The 12% increase every 5 years is attractive as well (most are 10%) Are they an “A” credit tenant? If they are then they are more likely to renew, especially if it’s a highly commercialized area. The question you need to ask yourself as far as risk is the following: what is the likely hood of getting a new tenant on the land if your existing tenant leaves. I have a tenant with 5 year options, and I can only hope they go belly up because I know the land is worth a mint and will demand higher rents for the next tenant to be.
I have several listings for triple net properties.Several have short terms remaining and do not have enough time for return of investment. Even with renewal options, it seems to me a risk of non-renewal would justify a higher cap rate that is being asked. Here’s an example: Lease expiration, 12/12; price, $1,426,338; rent,$116,987;Cap rate,8% options, three 5 year options w/ 12% increases every 5 years.
If this were a new 20 year lease it would make sense to me. With twenty years remaining, after five or ten years you could refi or sell capitalizing the new rental.