Sequencing roof and structure, a CAM cap, and a right of first refusal in an NNN industrial PSA
A 48,000 sf single tenant industrial building, 28 foot clear, built 2006, leased to a third party logistics operator with 6 years remaining, asking $3.35M against $231,000 NOI for a 6.9 percent cap, is a strong headline case for reading a lease carefully rather than trusting a flyer that says NNN. What a close read of the lease and its amendments often turns up: Article 9 language making the landlord responsible for roof and structure despite a flyer describing the lease as NNN, and an original 2006 TPO roof that means a recover or tear-off inside the hold, somewhere between $290,000 and $430,000 on that footprint depending on which contractor's estimate is trusted. HVAC responsibility left silent in the lease, with four rooftop units on the office portion and gas fired unit heaters in the warehouse, is arguable, and arguable tends to land on the landlord's side of the ledger in practice. Tenant insurance at $2M general liability with a $250,000 self-insured retention, landlord named additional insured but with no waiver of subrogation, is worth flagging to counsel directly. A CAM clause with a 4 percent cumulative cap on controllable expenses dated from a 2019 base year runs into a real problem when insurance costs have moved well past 4 percent a year since 2019 and the lease never defines what counts as controllable. An amendment granting the tenant a right of first refusal on any sale, with a 30 day window that survives to a successor landlord, is the item that most directly threatens a future exit. Tenant-installed 24 foot racking and a 3,000 sf mezzanine with no restoration obligation add another layer to unwind at lease end. A seller's position that the price is the price and the lease is what the market gave him does not resolve the fact that at least two of these items are real dollars. The sequencing question worth answering first is whether the roof and CAM gap can be priced and lived with while the ROFR remains a known and disclosed risk, or whether the ROFR, being the one item the seller cannot fix, is itself the reason to walk before spending more on diligence.
