Key Metrics for Commercial/Retail Development in Brooklyn

[Cheng Bin Zhang]

Hi All!

I've been asked by a family friend to invest in a commercial deal in Bensonhurst Brooklyn, NY that they've already procured. Having almost no experience in this arena, I'd like to tap into the BP community for some guidance.

The 5 year plan is to acquire with a construction loan, develop, lease, and refi. They're asking for $5 million. The team thinks it'll cost just under $2 mil to develop and lease (NNN - 5 year term) out at $2.5/sq/month with a total of 29,600 sqft. which can yield $888,000/year or with a 10% vacancy discounte = ~800k/year. So that leaves a cap of roughly 11.5%.

Is this reasonable?  Are there other metrics that I should consider?  Are there legal considerations since there are quite a few investors already.  Thoughts?

Thanks!

Cheng