Small retail strip centers in Plano Tx

[Fred Johnson]

What is the going cap rate for small strip centers on west side of  Plano TX?

[Joel Owens]

MOST IMPORTANT are any of the leases above current lease rates per sq ft in the market? You could have a cap rate drop upon re-tenanting as some tenants leave the spaces.

Do tenants disclose sales? Do you have updated and current tenant financials for liquidity and net worth? Are the operators that are mom and pop one unit owners or are they very experienced with many locations in the area? Are there any early termination rights in the leases? Subletting without landlord approval? CAP on controllable cam tenant reimbursements?

What is property currently assessed for property taxes? Even though tenant pays landlord for NNN if you pay a higher value the assessor could raise property taxes which would increase tenants cam above base rent. National tenants they plan for it somewhat but mom and pop the increase can be a big shock and some might default especially if they are unsophisticated one unit operators.

Any leftover tenant improvements amortized into the leases? What about leasing commissions are those only paid upon commencement and are paid off OR will you be obligated for option periods to pay a fee as well?

The 7 leases that expire within 3 years mom and pop might try to renegotiate the lease terms upon option periods and want free tenant improvements to update and refresh their stores. Is it just your center that is at 76% occupancy and everywhere else in a few miles is full or is there vacancy all over? Vacancy all over might show overbuilding and tenants might hop to other centers with better locations or sweeter deals.

How old is the roof and the parking lot? If those are getting close to the end of their life expectancy get estimates and credit from seller going into the PSA contract before you are too heavy in with attorneys fees and due diligence costs.

19 tenants are a lot to manage. Going in cap rate of 6.44 is low. You want to make money going in and turn around is icing on the cake and not the cake itself.