All Forum Posts by: Dennis H.

Bigger picture to consider - Commercial leases are often multi-year. If you go under for financial reasons, it hurts a lot more than having a tenant move out of an apartment building since there are less people to reduce the burden and the vacancy period is longer. The owner would also have to pay additional leasing commissions and TI's for a new tenant - more costs out of their pocket. 

Don't take their request personally as they are just acting as responsible landlords.

How to find the right comps:

1) Find properties of similar age; then

2) Find properties within a close radius of the subject; then

3) Evaluate the rents per sq ft; then

4) Go onto the property websites or tour the properties to confirm their rents;

5) Finally, update your UW assumptions. 

I final comment on something I read above - an appraisal should include all the valuation techniques. If it doesnt, it it not a good appraisal.

You should specify the type of retail.... businesses vs restaurants. If it is a restaurant, is each space individually metered? You will want NNN rents if possible for those. Otherwise you will have a super high utility expense to pay.

Also, you will need to include leasing commissions and tenant improvements in your proforma for when you do lease the spaces. LC's are normally paid at signing and again when the tenant occupies the space. TI's are paid as work is done. I'm sorry that I don't have any idea on what the going rates for LC's are for NJ. If it is a restaurant, seek a higher security deposit too since the industry can be so volatile. 

I think you are saying this looks like a good deal and you are looking for confirmation? Is that correct? 

PM me if you have any more specific questions. Happy to help unlike everyone else here who seems to be pimping a book or training method. 

Joel answered a lot but there others I would include too include: proximity to employers, occupancy % between Jan - Mar, are utility bills rubs or included, what are you reserving for unexpected expenses on top of your projected expenses...

It might be better if I write a long post in the future (used to be a banker before moving over to Institutional RE private equity) on how I underwrite. I find this site addicting and fascinating.

I have Lender Contacts for the Midwest from a deal I brokered. I have about 25 contacts that I received responses from. If anyone wants them, shoot me a PM and I'll send some of the contacts over. 

What is the property value and what LTV are you looking for?

Besides all the other comments, market also plays a role. 

Depends on the lock-out period. You will probably just go for a "supplemental loan" to get a cash back. Check out Sabal and Greystone as they dominate this $1-3MM loan landscape.

Were you working full time while you did this or did this become your full time job?

Been lurking for a week. 

Maybe because there aren't more LP/GP discussions on here? I see a lot of people looking to do things by themselves and not as a GP with a well-capitalized partner or group of silent investors acting as a LP. 

IRR, a time measured rate of return metric (XIRR for those of us in the commercial real estate private equity world), becomes very important for these capital structures. I don't think I've seen any discussions on promotes here either. If anyone is a GP, they should be negotiating a healthy promote for all of their deals.

Equity Multiples can work hand in hand with IRR this way. As a GP, you put in a much lower % of money; however, you can receive a lot more at the end of the day than your original pro rata share of the capital stack leading to greater capital accumulation. Do this enough times, and you can start investing as a sole investor.