Questions from someone who knows next to nothing...
I'm being asked to consult for my Dad because I am the "business degree son".  I didn't take any courses on real estate, I'm a marketing person.  

TL;DR version.  My dad owns some land that was worth about... $45k in 2009, now it's worth $94k.  It's property his father used to have a general store built on so it has some personal memory tied to it.  It's been a franchise chicken restaurant since 1980-something.

I'm being pulled into this to help decide if the lease options being given to us by the franchises' corporate people is fair or not (it's CPI calculated, so I believe it is).  

My questions are...  

Why did/would the land value double in 2009?

Is it suspicious of the franchise to offer us a 3-option lease (spanning 15 years) for an already 20+ year old location, when previous contracts have only had two 5 year options?

Lastly, the numbers they gave my dad show 6% increase for the first two 5 year options and a 13.4% increase on the last one.  My dad asked for an across the board 8% increase with each option (basically 8% increases every 5 years).  Any risks or harm in either one?  They balked at his 8% offer and came back with this new 6-6-13.4 one.

Thanks for your help!
[{"id": "ciawzp5", "text": "Something I've discovered from looking at the county's CAD, the land rollercoasters in price like crazy from 2001-2009 ranging from $31k to $65k.  But post-2009 prices have been in the upper 90's consistently since then.", "replies": [], "depth": 1}, {"id": "ciaz2ub", "text": "There is a lot more information that is needed here... is this a ground lease or do you guys own the structure as well? Either way, I would highly highly recommend consulting a commercial real estate appraiser or broker. I am an appraiser and we typically charge a fee, sometimes flat, sometimes per hour. A broker may do the same, I'm not sure, or possibly want a percentage of the deal. Again, either way, you need a professional to look at the lease, the market, and tell you whether this is reasonable. Consulting reddit will be insufficient imo. \n\nHaving said that, I don't think it is necessarily suspicious for them to offer you a lease with an initial term and then three subsequent pre-negotiated options. This is actually fairly standard, especially for large chains, and especially for ground leases. I've seen as many as eight options of five years each on large national tenants like Rite Aid, etc. Just think about it from a tenant's perspective... if this is in fact a ground lease - do they want to lease your land for 5/10 years, construct a multi-million dollar building, and then have no options to continue the lease after the initial term?\n\nConsult an appraiser! This is what we do allllll day :)", "replies": [{"id": "ciazp0y", "text": "I don't know if it's just a ground lease but looking at the property value data, the franchise has their name on it, and it's a prefab building. \n\nMy dad has told me that he owns the building but I suspect since he didn't even know the value of the ground, he may not even know what he owns or not. ", "replies": [{"id": "ciazsyu", "text": "Where are you getting property value data? Assessment records? Is it like a chicken farm or something? Trying to piece this together...", "replies": [{"id": "cib002f", "text": "County records, yep.\n\nIt's a Church's Chicken restaurant in Texas.\n\nBasically, I was wondering if there were any external factors that would've contributed to the spike in value.  It went from $45k to 95k in a single year and then has stayed above $92k ever since then, just seems odd when it rose and fell so much the decade prior.\n\nI'm assuming the property value assumes the building's value as well?\n\nWhat would the ground value of that amount be?  Is it estimated as a percentage normally?\n\nI mean, I'm not looking to do anything, I just want a better understanding of what I'm getting pulled into here.\n\nMy dad did his normal thing and has just been accepting a $500 paycheck from Church's Chicken every month for the last twenty years, splitting it with co-owners.\n\nNow he and my mom are talking about what they're going to do with it when they die, and they're talking about inheritance and wills and... if I have to revenue share with other members of my family, I would rather sell off my portion of this property and what I will own to them.  It will not be worth the hassle to me to deal with all of this headache for a monthly $300 stipend in 2029 when this lease goes up for renewal again.  I'd rather have my money someplace else earlier than that.", "replies": [{"id": "cib0g30", "text": "OK so they either lease the land from you and built their own building, or you guys own the building (and of course the land) and they lease the whole property. Are they the only tenant in the property - i.e. is it freestanding with a drive through or something or is it a strip center? Do you know what expenses they pay and how much they pay in rent? It doesn't sound fishy to me just yet... I'm thinking you have, again, either a ground lease (leased your land and built their own building), or you may have a single tenant net lease (STNL), in which you own the land and bldg, and they rent the property, and pay all the expenses - taxes, insurance, maintenance, utilities, etc.\n\nThere are a thousand ways you could structure a lease - that's the tricky part about real estate and especially commercial real estate. If you do have a ground lease or a STNL then they are usually worth quite a bit of money - DEFINITELY more than just the underlying land value that you're pulling off your city/county/whatever's assessment record. Trust me on this - you need a valuation professional to look at this. It sounds like you have a potentially valuable lease here if you wanted to sign these guys and then sell it on the open market. Ground leases and STNL with good tenants are golden. They sell at low capitalization rates (the lower the rate the higher the value), but depending on a variety of factors (lease length, credit rating of tenant, etc.).", "replies": [{"id": "cib1xew", "text": "It's freestanding with drive thru.  \n\nTotal rent collected is $2250.  The restaurant pays all taxes and utilities.  My dad just basically collects a check.  The lease paperwork isn't even a legal document, it's just a list of monthly payment amounts with option dates for each amount with a signature page.\n\nMy only hesitation in getting anyone involved for land evaluations is that my dad is absolutely not interested in selling right now at all and the lease paperwork has to be submitted back by June 30th prior to the end of the current lease.  \n\nThere's a LOT of details I'm leaving out about the ownership because it's a big hairy mess that I don't want to get into that is only going to get more complicated if/when I inherit this land.\n\nThe TL;DR is that my Dad and aunt (who were willed the land when my grandmother died) share the restaurant's space with the neighboring land owner.  It's like my Dad's land is 75% of the total space, they have the back parking lot.  \n\nThe rent payments are distributed 50/50 though between my Dad and the other land owner.  It's jacked up because we own 75% of the land the property sits on, but my grandfather used the original land owner (this was back in the 1980's) as legal counsel to lease out the space, so he gave up (then) a share of his rent to the other land owner in exchange for setting up the deal.\n\nNow we're going to be about 20-30 years past this and the current co-owners are making money off of the same deal my grandfather set up with their father, something I don't believe needs to be honored anymore since all they do is go to Investopedia.com and look up CPI calculators to figure out if they're getting screwed around on their end of the deal or not and largely keep my Dad out of the loop \"since he's not in real estate\" (my mom's words).", "replies": [{"id": "cib2eco", "text": "Yea this sounds super complicated. You may have some property ownership and easement issues that I wouldn't want to touch! It's tough to say without knowing where it is and the dynamics of the area, whether he is getting a fair deal on the rent. The land value, as assessed, could have increased significantly if the area developed significantly in recent years. Honestly though, the assessed value doesn't mean much, so I wouldn't spend a lot of energy on it.\nMy main concern would be 1. whether you're getting a fair deal on the rent and 2. whether you think the area will be developing significantly over the next 10-20 years. If you think you're getting a fair market rate on the rent, you might as well sign and lock in the rate for many years to come. If you think the area has gone to shit and the rent will go down in the future, sign them for as long as you can. If you think the area is great and developing and you'll be able to get 20% more in a few years, you might not want to sign them for more than a few years. There is no right way to do it. I've met landlords that only like 1 year leases. I've met landlords that won't invest unless they have 10 year leases. It's just an exercise in what type of risk you want. Sorry that is probably confusing but it's not a simple subject.", "replies": [{"id": "cib68dt", "text": "No you've been super helpful. \n\nThanks for all the info. ", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}, {"id": "cib206d", "text": "If I could do anything with the whole affair myself, I'd sell the Church's location to the other land owners and walk away with whatever I could get for it.\n\nBut since my Dad has sentimental ties to the land for some reason (the land was originally a general store my grandfather ran for 15 years), this won't happen at least until my Dad and aunt both pass away (they were both given 50% of the land).", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cib6fv8", "text": "Disclaimer: I work in warehousing and large scale commercial and industrial rentals.\n\nThe way I've always looked at the leases were - what are my outs, what are their outs, and what do I WANT to make, and want is the property going to be WORTH at the end of its life.  If all of those match up, am I happy making a little less up front (6%, 6%) to make a big increase in years 10-15... perhaps.  But if you think in 10 years, if they have an out after 10, that they could bail and you couldn't re-lease the property without a lot of upgrades / investment, it may be worth it to look elsewhere / other lease options.\n", "replies": [], "depth": 1}, {"id": "cib7dje", "text": "This is a little confusing, you're saying the lease is calculated based on CPI but then you say the increases ate set at 8%, 13.5%, etc. I'm a little confused by that. I do commercial real estate for a living, there are a couple things you want to do. 1) get a broker. I know it sucks that you have to pay them 3-5% of the lease but you need comps to make sure this deal makes any sense at all. A quality pad site can generate a ton of income and you may be getting a fraction of what it'd worth. 2) you need a lawyer to draw up a real lease. There is a ton of protections for you that can be built into the lease. A spread sheet with increases and options is not a lease. NNN leases like you're talking about are great because they're so easy. You don't have to do anything, that's why they call them \"hell or highwater\" leases. Pretty much no matter what, they have to pay for whatever happens. Get an attorney and a broker, you will be happy you did.\n\nAlso, assessed value means very very little. It's all about income and income is based on the comps in your area. PM me if you have more questions, I do this all day.", "replies": [], "depth": 1}]