All Forum Posts by: Greg Scharlemann

Find a similar property in your market and ask the tenant who they work with for building related issues. They may give you a hvac contractor or something but dig a little and you can probably identify the manager. Call the people whose name comes up multiple times. You can also ask local leasing agents for recommendations but they tend to focus on owners/clients and less so on managers.

What kind of credit are you getting? Is it corporate credit or the franchisee's credit?

Joel gives great feedback. I'll only add a few more thoughts. Does the restaurateur have a track record? I'd be weary of converting the retail space to a restaurant unless there is a successful track record and the area will support a restaurant. Most restaurants fail so you should be mentally prepared to have to replace it sometime in the future. Hopefully most of the improvements are reusable for a future restaurant and in many cases they will be unless they install a bunch of hoods and table top grills at the seats. Assuming the place will be successful you can maximize your exit with higher rents at the end of the term. If you give free rent or discounted rent in the first year you may be able to get larger bumps later in the term. The only risk with this approach is if the restaurant fails or struggles later in the term.

The turnaround of vacant space in the office building if a tenant leaves will be longer and cost more to lease (commissions and TIs) than the MF. Office numbers are clearly stronger so if you have the capital to carry you through a longer vacancy I'd go for it.

4 conventional loans may mean 4 times the closing costs. Probably best to run the numbers under not scenarios if you can get quotes for each. The key to conventional is separate parcels and it sounds like that part isn't an issue.

Given the original post is 3 months old Calvin Clark has either closed or walked away from this deal. Calvin, what's the word? How's it going?

Michael Esselman is each building on a separate parcel? If not that may throw out the conventional financing option.

Thanks for sharing your approach!

There's a lot that goes into underwriting an office project. You will want to be sure you understand the type of leases (full service, NNN, or something in between), zoning restrictions, remaining term, expected CapEx on releasing (for TIs and commissions), etc. Start by modeling it all to see if you can get to a satisfactory return.

As far as operating expenses, other costs to consider: janitorial, security, admin/mgmt, building repairs and maintenance.

I'm sure poking around BP you can find a bunch more of things to consider. Hopefully the above gets you started...

Congratulations! Sounds like a great creative solution to get the deal done. 

@Marc C. - how did you find this deal?