Mixed Use Opportunity

[Patrick Soukup]

NOI is $145k. Purchase price will be between $4.75m and $5m. NOI is negatively impacted currently from leasing commissions and a large retail vacancy. Add an addition $40k for NOI once the vacancy is filled.

$300,000 worth of work once the building is purchased. Once that is complete the resi rents increase 10-15% or $16k-$24k with a bump to future commercial rates.

18,000 Square Foot Building in a good location. $/Sq Ft isn’t horrible for market.

At best NOI could go from $145k to around $220k which would put this at a 4.5% Cap Rate. It is by no means a screaming deal if all went well but a meager deal as is.

How do you proceed?

[Joel Owens]

So going in cap rate of existing NOI is under a 3 cap at 5 million?

Very thin deal. I would have to see if ability to carve out outparcels with land, put in national tenants at higher rents, etc. Even then I do not like deals where existing cap rate is super low and all these things have to happen just to have a decent cap rate and cash flow. I like buying value add where existing cap rate is already high. In this way it cash flow decent already and upside is icing on the cake and not making the cake.