Any Phoenix area Real Estate Developers on the forums?

[Brock Nelson]

I have some questions about developing a lot for a fast casual concept next to a McDonalds. 

[Joel Owens]

I am a real estate developer but not specifically in Phoenix. I focus on retail also as a commercial real estate broker.

Most developers hold at least 1 year to pay long term capital gains versus short term. If they have built up carry over losses from other properties then it usually doesn't matter as much.

When developing out the lease is critical from a perspective of eventually selling off. A bad lease can make getting a loan on the property tougher for an end buyer that is a coupon clipper for a NNN lease.

Tenants love to throw in crap like blocked rent ( goes up every 3 to 5 years 6 or 10% at a time versus each year), early termination rights in the primary lease period, below market rent bumps, sales drop clauses, off load NN for roof and structure versus true NNN, defining option period with terms that are favorable to them, weak guarantee on the lease or parent corporation drop off after a few years,etc.

All of these things can affect your exit value as a developer. You also need to know building costs to arrive at a max price you can pay for the land.

Exterior build out tends to run about 100 per sq ft and interior TI about 30. Some places like Starbucks can be 50 or 60 TI. If you have a very strong corporate guarantor then paying out more TI can be less risky than a small franchisee.