Commercial Real Estate Development Process - NNN Tenant

[Peter Tsambounieris]

 The site is 1.93 acres. It's a great location. Median incomes in area 110-140k plus on all rings. 25k vpd currently. ~2500 units including a majority single family houses in development currently within 1-3 mile radius.

The location is prime hard corner intersection with 3 traffic lights and a jug handle across the street from 2 schools and about 2 miles from the nearest busiest highway with 80kvpd.

I've been told from 2 developers is that they would need to secure a variance to add another business to the property I guess due to building restraints and to make it economically feasible. The highest offer one developer is offering is 375k rent for JV or 5.5M purchase price buying it outright.

While it's not a bad deal, it's just that we're doing a lot more business than we had pre-covid and it doesn't make financial sense currently. Suppose we wanted to develop it ourselves in the future. I'm thinking the property could bring in ~500k rent which could bring in a hefty price tag on the market.

Some questions I have

1) I guess we would be acting as the developer in this case watching over the GC. From what I've read we would need a feasibility study and conceptual site plan to lock in the lease. We know Wawa is very interested in the property. I've spoken to them directly, they referred me to their "preferred developer". Which is funny because I've also had another developer tell me they are Wawa's preferred developer. I don't understand how there can be 2 in the same area unless someone is lying but ...

Would they be interested in doing a deal directly if we had a qualified GC and team needed to get approvals?

2) Obviously we still need to find another tenant and get the variance to make the project worth it. I read that we can get the whole project 100% overfunded by the locked in lease. Could we use some of the funds to pay ourselves during construction to have some income coming in?

3) Does the gas pumps area count as square footage usually for lease pricing calculations?

4) What do you think would be a good co-tenant for a wawa. I was thinking a chic-fil-a, chipotle or a bank which would be more marketable with better increases? Do you know of anything in particular that Wawa doesn't want to be next to? I'm basing these assumptions based on the area and how there's none relatively closeby.

5) Does anyone have any commercial development experience in the area? What are your thoughts on costs to construct and to get variances. I was going off estimates from what I've seen online and current high construction and estimated costs of $200 per square foot and roughly 8500 square feet combined for the 2 buildings (including gas pumps estimate). I guess I will probably have to shop those out. The variance cost is what scares me. I'm assuming that if all these developers are making bids they know they can get the variance approved. 

What would you say is a good price for an architect to pay for conceptual plans, updates, zoning work and to defend the plans in court. These conceptual site plans are the same plans that we show to the tenants to lock in these leases right?



Best,

Peter Tsambounieris, MBA