All Forum Posts by: Howard Yang

Bob, thanks for replying. I guess that's inline with relatively higher cap for these type of properties (+50-100 basis points) compared to other types of commercial such as fastfood..etc

Ronald, the property is located in CA.

One of the other questions I was hoping to get some inputs from this community is whether detecting some contaminants in soil and air is common or not for auto service properties. My logic was: If this is typical for these properties then it is worth getting deeper on the cost vs benefit analysis (ie spending money on assessment). If it's not typical, meaning most auto service properties actually shouldn't have these problems then the decision would be easier to make.

Hi Bob, appreciate the response. To clarify, the soil vapor means gas coming out of the soil dug out at different depth so I think there is more than just indoor air needs better ventilation.

The source of the contamination are suspected to be: 1. Potential underground storage tanks from adjoining property 2. Numerous regulatory violations dating from a long time ago (ie mishandling hazardous waste materials) as the site has always been used for auto services since the 60's.

Anyways, I guess the main question on what's the worst that could happen and how much will it cost to fix it would need to be answered by an engineer. 

I'm assessing a commercial property (occupied by a major automotive service tenant) and the seller has completed a Phase1, Phase2, and a Phase2 supplemental report as part of the seller due diligence package. The final results were indentified volatile organic compounds in the soil vapor and indoor air exceeding the commercial environmental screening levels for benzene, ethylbenzene, PCE and chloroform. The groundwater and soil turn out to be ok with some contaminants but all well within limits of the environmental screening levels. So my questions are:

1. How big of a liability/risk am I looking at. Are these Phase2 results typical for these type of auto service properties? Are there specific red flags when assessing these type of properties?

2. The vendor that completed the report recommended to just have better ventilation system indoor. If the vapor is coming from the soil, wouldn't the proper way to remedy the situation involve actual soil removal/clean up?

The reason why it's still worth considering this property is due to the prime location and future potentials of the property.

Any advice much appreciated.

Howard

Has anyone used a 3rd party to conduct due diligence during the purchase process (like EBI or AEI)? If the experience was positive, would you share their contacts? Exploring this option for a MFH deal in Mountain View, California. Thanks in advance!

@Jeff Kehl Absolutely, been talking to attorney so will probably end up doing combo of LLC/Trust/Insurance for asset protection and anonymity regardless of what asset type I'm buying.

Thanks everyone for the inputs and comments. Super helpful as always.

@Stanley Bronstein Will do! Thanks again sharing.

Came across this deal and was wonder what folks think about this type of arrangement and whether or not if it's an actual issue.

Freestanding building on a new 20 year lease to a national fast food chain, (operated by franchisee, NNN). Tenant is also subletting a portion of the building to a local Spa store as part of the agreement. The fast food tenant is responsible for the whole lease agreement and would manage the subtenant and pay subtenant's rent should the subtenant leaves earl.

When evaluating this deal, besides the primary factors (location, operator, cap, lease terms, growth potential...etc) would this subletting arrangement be a deal breaker? If not, what are specific look-outs to pay closer attentions to during the due diligence process?

Thanks in advance!

@Amit M. It's really the strategy that's the best fit for our current situation. The key drivers for decision making for us are evolving over time and at the moment, liability risk are coming up near the top. But of course, everything you have listed are absolutely important as well.

@Joel Owens As always, thank you for the context! Very helpful. Makes a lot of sense. So glad I asked the question here on this forum.

@Russell Brazil Make sense. Thank you for responding to my questions.

This will be the main reason why I may put most of my portfolio in Commercial instead of residential.