In diligence on retail property

[Sam B.]

Im current under contract on my first deal.. and have 45 day diligence period

Its a retail property in NJ that is 3 units and occupied by mom and pop tenants. Unfortunately NJ is not allowing non essential businesses to be open, so all the tenants are closed.

Since I’m new to this, I am not sure how to proceed as I have two issues..

1) tenant strength is different vs when I agreed to this deal a few months ago

2) it’s impossible to do tenant interviews, inspection, etc given current conditions

I had my lawyer draft a extension addendum and seller agreed to a 15 day extension, but it’s such a short period extra and doesn’t address the tenant strength issue I am facing.

I think I need to go back to the seller and ask for more help here, and I want to minimize cost till I have more certainty. Could you guys give me your thoughts on what to ask for which would address these issues? Any other advice?

Much appreciated

[Jacob Dawson]

Hello Sam, first of all, congrats on your first deal! I am a commercial real estate broker based out of the Chicago land area specializing in multi-tenant retail as well as STNL.  

You are right in saying that the strength of these tenants has changed. I would say you need to re-run your numbers on this current deal and determine if your initial risk metric is still valid. As far as going to tenants and asking them their status, that is a conversation that you could have and is warranted. But getting to them will be hard. Perhaps you could talk to current management or ownership and ask them to reach out to the mom and pops. 

Since this circumstance we are in is a different one (one that no one could have predicted) , I believe you may need to adjust your offer on the property to compensate for the new risk. 

I hope this helps! If you have any other questions feel free to ask