Dental NNN in Michigan suburb

[Raj Singh]

Hi there, Id like your opinion on potential pitfalls of a deal in a suburb of detroit outside of Birmingham. Its a NNN dental office with 8 years left on the lease of a national dental chain with corporate guarantee and 200 other branches nationally. Its a single stand alone building of about 6k sqf on 0.75 acres of land. its priced at 375 psf which is high, at about a 7% CAP with 8 years remaining on lease. 2% annual escalations. That works out to about 26 psf for the tenant.

It would likely be a grade B building overall,. and was rehabbed extensively from an empty semi abandoned building 2 years ago. To me, the price PSF is high, but I think the building is sold as a function of its Cap rate. Id love to hear from you experienced investors!

In terms of financing, I am basically getting almost 100% at 3.25% via creative financing that is afforded to my by my bank.

Thank you in advance.

[Greg Dickerson]

Originally posted by @Raj Singh:

Re financing: It’s international financing from Asia leveraged on a corporate guarantee of a financially stable business owned overseas. 

@Steven Lowe

@Michael Jones

I agree with you. Don’t think land would be worth more than 200-300k. Essentially the 700k premium on the price is turnkey solution of corporate  presumably stable tenants (assumption).

It’s a private national dental group with many locations and has 5yx3 renewals after . Parking for about 20 cars

If the comps and replacement cost are below the asking price then it becomes a function of returns and what that return is worth to you. If it meets your return requirements and you feel it’s a good long term investment and the property can be leased easily if this tenant vacated then go for it. If not make an offer where you need to be based on the comps and replacement cost.