This is Retail Center a deal? Please advise

[Greg P.]

Hello, I was offered this opportunity and I think it may be a good deal.

Retail Center : 5600 sq ft (NNN) Triple Net
2 National Tenants - Radio Shack and Sherwin Willaims

Price: $700,000
Down Payment: $106,485
Gross Income: $77,503
Expenses: $12,979
NOI: $64,524
Loan Payments: $37,871
Pre Tax Cash Flow: $25,653
Principle Reduction: $9,890

Summary:

Positives:

- The bank is willing to finance with only 15% down and 4.5% interest rate and no balloon.

- There will be no personal guarantees (non recourse)

- Radio shack is paying 2,000 a month less then what they should be and if they go out of business or leave when their term ends in 2016 then the Income will go up by 24k once the new tenant is found

- Anchored by the largest/busiest grocery store in a town with a population of 25,000.

- Cash on Cash approx 20%

Negatives:

- Sherwin Williams lease is up in 3 years, but they have been there for over 30 years.

- If Sherwin or Radio shack leaves then there will be TI money needed to redo space.

- Lastly, the expenses are without a management fee, and vacancy reserve so with that included it may be a lower NOI. Also there is no snow removal accounted for. From my understanding, the tenant pays for everything else.

Please advise as this is my first possible commercial deal.

Thank you very much.

[Joel Owens]

Not excited about Radio Shack or Sherwin Williams.At least in my state those brands have been dying off and closing down.

You need to drive a 2 mile ring radius and know what COULD go in there if they fail and for what price after TI improvements.

Non-recourse is great but you still have to put a chunk of cash down so have to make sure and protect the down payment.

For paint unless you are in an affluent area most people go for Home Depot,Lowe's,Wal-mart for cheap prices.Same thing with Radio Shack unless it is a specialty part you cannot get anywhere else.

I would really want to see their financials for that location of both businesses and how they have been performing over a span of time.