Is a 10-year NNN lease with no renewal options worth less than an 8-year lease that has two five-year options the tenant actually uses?

The market prices it inconsistently, and that inconsistency is where the opportunity sits.

Brokers quoting primary term remaining as the headline metric are not wrong to do it, it is the fastest legible number for a LoI. The problem is that acquisition cap rates on NNN deals are compressed enough that a 25 to 50 basis point mispricing is meaningful capital, and the difference between a countdown and revealed preference can easily be that wide or wider, depending on tenant category and submarket liquidity.

The assumption doing the most work in your framing is that exercised options are a clean signal of tenant intent. They are, but the signal degrades depending on when the option was exercised relative to the tenant's broader portfolio strategy. A dollar store that exercised in 2019 when they were aggressively expanding is not the same signal as one that exercised last year after closing two hundred underperforming stores. The behavior is the same on paper. The strategic context is different. A buyer at acquisition cannot always distinguish those cases from the lease abstract alone.

The risk you have not named is what happens to option rent. If those exercised options locked the tenant into below-market rent and the remaining option periods continue that trajectory, the income predictability you are paying a premium for comes with a ceiling. You may be buying predictability and sacrificing upside in a market where CPI bumps on a new lease could have outpaced the option escalators. That tradeoff can still be the right call, but it should be explicit in your underwriting, not assumed away by the quality of the signal.

Your Fresno example is the correct frame: lease structure is a necessary condition for a clean hold and exit, not a sufficient one. The market mispricing question you are turning over is real. It shows up most in secondary markets where transaction comps are thin and brokers anchor to primary term because that is what the last three comps used.

What tenant categories are you looking at, and are the option rents on these deals indexed, fixed increases, or fair-market resets?

The market prices it inconsistently, which is exactly where the opportunity sits.

Brokers quoting primary term remaining are giving you a number that is easy to communicate, not one that fully captures tenant behavior. A 10-year flat term looks cleaner on a deal sheet. The problem is that "years remaining" and "probability of continued occupancy" are two different things, and most marketing materials conflate them.

Your revealed-preference framing is sound. A tenant who exercised a five-year option made a deliberate decision to stay at a rent that was likely above current market, because they valued the location. That is real information. A tenant sitting in year six of a flat ten-year term has made no such decision. You do not know what they plan to do, and neither does the next buyer.

Where the market does price this distinction is in cap rate, though unevenly. Cap rate is the ratio of annual income to purchase price. A lower cap rate means a higher price for the same income. Investment-grade tenants on long leases with demonstrated renewal history tend to trade at lower cap rates, meaning buyers pay more for the security. The question is whether the premium at acquisition fully reflects the behavioral signal, or whether a buyer who reads the exercised options correctly can still find an edge against one who is only counting years.

I would not say the market is systematically wrong, but it is often lazy at the margin. Brokers optimize for speed and readability. Buyers who do not dig into renewal history probably do not bid the distinction in.

The Fresno situation you mentioned is a useful reminder that site-level risk sits underneath lease structure entirely. The guide's point about concentration risk applies there too: one tenant, one location, one set of external variables you may not see until you are already in.

What type of tenant are you underwriting in the deals you are comparing? Investment-grade credit or regional operators?