Question on commercial property listed by a broker

[Chip Stroz]

I recently ran across a property that was listed by a broker. It was built in 2019, and it is listed as a .70% cap rate. It is only 43% occupied. They gave the proforma, and if ALL the projections of that proforma were to happen, it would be worth 1.9 million. They are asking 1.6 million for the property. But at 43% occupied, and all the expenses, current NOI, etc., it isn't worth anywhere near that price. Why would they try to command such a high price, if it is over half empty?

[Chip Stroz]

@Lucia Rushton Thanks so much for your advice.  I've heard that realtors will sometimes want you to pay for some of "what could be" instead of "what it currently is."  I was just wondering why they would be asking that much. Because if you look at all the numbers right now, a fair asking price (just based on the numbers of the business, and not the value of the building itself), would be somewhere in the $250,000 - $300,000 range.  But I thought that since the building is so new, they'd be just asking that much to try to recoup some of what the seller spent on the buildings themselves.

@Cason Acor The asset class is self storage.  It looks like it is in a decent sub-market in Mississippi. There's about 40,000 Net rentable square feet.  And there is also an empty warehouse that is generating no income.  Climate controlled there are a multitude of different sizes.  Non-climate controlled there are only 3 sizes.  Doesn't seem to be an over-supplied market, but I haven't done a deep dive on that yet.