How to approach off-market industrial property

[Tony Schneider]

Hi all –

Disclaimers:

I don't have any experience with industrial real estate - or CRE generally speaking for that matter.

I will be keep this post intentionally vague for the sake of privacy. Hoping actionable advice can be provided without such details.

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Let’s say I know of an industrial property with a few tenants that is negatively cash flowing due to a combination of mismanagement and below market rents. Let’s say the main tenant accounts for most of the annual revenue with a lease ending soon (is healthy and probably looking to resign). Let’s also say the owner needs to exit around this time for other financial reasons.

1. How would the timing of a sale effect a prospective asking price assuming the tenant would expect a rent increase under new ownership?

2. I don’t know the condition of the property nor how to properly assess it considering my lack of experience – who would I approach due diligence? 3rd party firm? A participant investor in the deal?

3. I am not an accredited investor nor have the capital to participate in the deal. What is a reasonable proposal to private investors for sourcing such a deal?

     a. My spouse is a licensed agent in the state. Become the buyer agent?

     b. Waive the commission fee and ask for <x% equity?

     c. Be the buyer’s agent and ask for same x% equity?

4. Where to source investors once due diligence is complete? Buy/hold vs resign/source tenant + refi/flip has yet to be determined.