Looking at a commercial strip on a corner lot

[John McKee]

Currently this building is occupied by 6 tenants (one empty).  One is well known, but the tenant says it's their worst performing store.  The site is at a light and is on a corner and the traffic counts seem decent at about 31,000 cars a day.  Negatives are it's a small town (but not dying), the site is totally dependent on car traffic, it doesn't look like the site is drive through friendly for future use, and the site is not in the heart of town but 3 miles from it.   Thoughts?? 

[Joel Owens]

Look at current and future land use map for the city or county. Check with economic development department for what the plans are for the immediate and surrounding areas. Check small junior anchors freestanding and large back anchors for cross traffic around the site. Look at if each road is only 2 lanes each or 4 lane. When you say 31,000 cars a day do you mean both roads at the corner one is 20,000 and one is 11,000 and you have drive in access from both sides?

If a single road is getting 30k plus cars a day then typically the state DOT will want to widen to 4 lanes on each side to accomodate up to 50k to 60k cars a day. If total from both sides is 31,000 DOT might leave it alone for awhile. Most states have traffic counts by year so you can see if that corridor for counts has stabilized, decreased, or increased and by what percent. If a traffic road widening is planned when they say 1 year it could take 2 years and during this time with small tenants they typically cannot hang on and stay open when business reduces by 50% or more. With mom and pop tenants would make sure rents are way below market so if they go dark after your release costs of (TI,LC, and legal fees) you at a minimum break even or have some upside on NOI growth. Check age of roof and parking lot as those are huge costs and even with tenant CAM you tend to have to spread the cost out for reimbursement over a long period of time so instead of doing that I get credit from the seller at closing to hold for those upgrades so it does not stress test tenants or affect existing NOI. The tenants instead see a caring new landlord and are excited but they do not know it did not cost the landlord a bunch of money the old landlord paid for it. You have to make sure lender will allow the escrow post closing and not want to reduce loan proceeds. That does nothing for you but reduce loan payment by 30 bucks a month etc. and still have to come out of pocket likely a few hundred k to do the repairs.

Could go on and on with comments. Good luck. Nio legal advice. I am covered up in deals.