Industrial Property w/ Dilapated Building BUT... a $$$ Billboard

[Matt Dorsten]

I wanted to get some input on a piece of property that keeps coming across my desk...

This property (about 1/4 acre) is in Denver and has about 5,500SF of building on it, about 4,000SF are old row-homes and 1,500SF is a 2 story building that looks like and old office building.  The buildings are in terrible condition and I don't know if they are even worth remodeling, maybe demo'ing is the best option.  I've walked the property but the windows and doors are boarded up. The zoning is already in place for industrial.  BUT, this property has frontage on a heavily traveled arterial road and so the billboard on the property is the real income potential (even though the billboard is under-marketed due to lazy ownership).

Expense:

• The owner will sell for $425,000-$450,000.
• IF the building's could be salvaged, it's going to be about a $250,000-$400,000 remodel (this includes paving and grading for a parking lot).  
• Total (worse case scenario): $850,000

Income:

• The billboard could lease today for about $2,500/month
• If the buildings are salvageable, net rents could be in the $8-$10/SF range (let's say $9/SF average for the 5,500SF) or $4,125/month.
• Total: $79,500/year or 9.35 CAP rate (nice!)

This would definitely be a very involved project.  Should I put this pipe dream to rest or do you think there might be some real potential here?  Am I trying to polish a turd?