Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Commercial Real Estate Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 17 years ago on . Most recent reply

User Stats

24
Posts
0
Votes
Andy M
0
Votes |
24
Posts

10% cap is pretty good, right?

Andy M
Posted

Hey guys,

So I just found a rather large property (for me anyway). The asking price is ~14.5M and the current NNN lease backed by a AA company gives a NOI of 1.45M/yr. The occupying company's lease has another 2 years on it at this rate, and then they have 4 options to extend for 5 years at fair market value.

Now, I'm thinking that 10% cap on a Class A building (built in 2000) is damn strong. The PSF is at 97$, seemingly well below replacement. The main problem seems to be that we could lose the tenant in 2 years. So I was thinking that I should call up the tenant, and ask them if they would be willing to go ahead and accept the first option at least (for 5 years more) in return for a somewhat lowered rent than fair market value would likely be in two years. I might even ask if they want to go for 10 years, again at a somewhat reduced rate.

Locking the rent in at a rate somewhat below market could somewhat lower the value of the building in the coming years (since the rates could be below market), but if we could maintain even a 9% cap rate (i.e. let them rent at 10% less than they are paying now) I can't imagine having trouble securing financing.

I mean 9% cap on a AA secured property for 7 yrs gauranteed would be amazing. Whatcha think?

Loading replies...