First look at a commercial property

[Andy M]

People always say to think big and outside of your comfort zone, so I'm looking at a big office building in Syracuse, NY. Here's the basic scoop:

4.2 million asking
5 story, 105,000 sq.ft. net leasable area in downtown Syracuse.
Built in 1980. Renovated in 2006. Class A office building.

Currently there are leases of at least 3 years remaining on 45,000 sq ft for 520k/yr. I don't know the details of this lease; obviously I'll look much more into it if I go forward with this.

That leaves 60k sq. ft. left leasable. The selling realtor claims Class A rents (\\go for 15-22 $/sq.ft. So lets assume we can reasonably quickly lease 50k of the remaining 60k at 15 $/sq.ft. That gives 750k/yr.

So that would, at ~91% occupancy, give a gross income of 1270k/yr.

Now as far as expenses go, I don't know if the current or proposed leases are NNN or what expenses are covered, etc. Lets assume expenses equal to 40% of the gross income, or roughly 500k.

So our NOI appears to be 770k/yr. Lets assume a downpayment of 20% and a 7.5% 30 yr fixed mortgage on the balance of 3360000. That gives a debt service of 285k.

Then we're getting a roughly 485k return on our downpayment of 840k., i.e. about 55%. Looks good to me.

Now, obviously the biggest issue would be getting the area leased up. However, even if only 20k of the 60k of space gets leased at even 10$ /sq.ft., we're still at a positive cash flow.

What do you guys think? Worth some more investigation? If it turns out to indeed be good, anyone interested in partnering up?

Andy