All Forum Posts by: Derek Bell

@Ronald Rohde

Well, just waiting for seller to accept my offer. They are wanting 3.95m and I offered 3.8m. The deal would still pencil at 3.95m but I really don’t want to pay that. I at least want to feel like I’m getting a deal. As for leasing, I feel comfortable in that area market to get $14/sf. It wouldn’t get leased right away, but at least I have a 6 month leaseback paying $14/sf to buy me some time. And I may just try to extend the building. It’s possible, but I’m sure the city would make it more difficult than it has to be. They always do. 

@Trevor Finn yes, numbers look just about on point. Looks like you have done this a few times. :)

@Ronald Rohde yes, I can get a 5.75 -6% with my local bank. I use them for most everything. They will do a 75% LTV. And yes, biggest risk is letting it sit for 12 months. But, I can still pay the note even if it sits empty after the sale leaseback.

@Gino Barbaro going in cap rate will be 8.5%. After I add the outdoor storage lot I would be around 9.5%. It wouldn’t cost much of anything for my guys to grade gravel and fence the lot. What I really want to do is add 15k sf to the existing warehouse. I normally just do new construction on these pemb, so I have never done an actual modification of an existing pemb to increase the square feet. It’s more risk because no way I could have it leased before my 6 month leaseback is expired. But if I went that route I would add 15k sf to the existing warehouse, making it a total of 38k sf with office/warehouse. I would then try to find an owner/user that would want to buy it at around $225/sf. That’s the long “hail Mary” scenario. It’s a long shot, but if I did so I would have a cost basis of around 5.1m and sell for 8.5m. Take proceeds and 1031. 

My easiest and safest bet would be to just build the outside storage lot. I can easily do this while my leaseback tenant is still in the building. I would have the storage lot completed and have 6 months to find a new tenant. I would shoot for 368k NOI nnn on the new tenant. Would most likely hold long term in this scenario and refi if it made sense.
   

What’s the zoning? If allowed by the city, grade gravel and fence it and then lease it as outdoor storage. 

@Ronald Rohde

23k warehouse on 3.9 acres in one of middle TN fastest growing cities. 1 mile from major interstate. 

Purchase price: $3,800,000.  Due Diligence: 90 days   Close: 30 days   Earnest money: 1%
Sale lease back that will take effect at closing. $26,800 a month for 6 months NNN.

I can easily grade, gravel, and fence off the rear 2 acres for outside storage that would easily bring in an extra 4k a month. Or, even better, add about 15k sf to the existing warehouse. The existing warehouse would rent for $14/sf nnn. 

Let's look at the worst case scenario. $14/sf nnn on 23k sf warehouse plus the added lay down yard = $362,000 NOI annually

Cost of the yard will only be around 100k. So, all in @ 3,900,000. 

$3,900,000 with 25% cash down, that I would provide without any other investors. Bank loan of $2,925,000 at 5.75% with 25 year am. 

Annual P&I would be $220,812. Annual NOI would be $362,000. Annual passive at $141,188

Thoughts?

@Ronald Rohde

Yep, I would be adding the same thickness of slab and only extending the portion of the warehouse only, not any office etc. 

@Cole Bigbee

Would love to know what a pemb specialist thinks of this. 

Has anyone ever tried to increase the size of a PEMB? In turn, you would raise the annual NOI. Let's say you have 4 acres of industrial zoned property with a 20k sf pemb. Most developers would just utilize the extra yard space for outdoor storage. But if you have enough room to expand the warehouse portion of the pemb, the topo is level, not hitting on a setback or ROW, an easement, etc…..then why not expand? And if you time it just right when your tenant lease comes due, or have a tenant that just needs the extra space, then it's a win win since you dont have to have any vacancy.

I guess about the only thing that would worry me the most would be that if you add to the existing building, and if the city code has changed since after the initial build, then they are gonna want you to make all the necessary changes to the existing portion of the pemb. Also, may have instances in which if you go over a certain amount of useable sf you may have to fire suppress a building that would not originally have to be since it hit that minimum space requirement. Further, you may have a situation in which it changes the parking requirement etc. Oh yeah, and you would have to look at the load requirements on the endwalls, especially if the pemb doesn’t have some kind of expandable endwall. 

Maybe it doesn’t sound like a feasible idea now that I think of it. I guess, just like in residential, sometimes its easier and less expensive to just bulldoze and start new then trying to do an addition. 

Thoughts??

Has anyone had any experience in the assisted living/nursing home complex type of developments?

I have 12 acres in middle tn that I am working on entitlement with the city. Front 4 acres is zoned commercial, rear 8 acres is zoned large lot residential. I am parceling out the front acreage into (3) one acre commercial lots. The back 8 acres I was leaning towards townhomes, but I don’t think the city wants to see any additional townhomes. I am thinking a rezone to a commercial mixed use. I do know the city would like to see assisted living type property. So, for my proforma, how much does a developer or  assisted living company pay for entitled land in this type of space? Ground lease? Fee simple purchase?