All Forum Posts by: Jade S.

Just one office building in my portfolio at this point in the Upstate of South Carolina.  Two story, 7500 sq foot building with 5 tenants…just had one new tenant sign a lease for 1200 square feet even before the exiting one departs, and another current tenant has requested a 2-year renewal extension several months before their lease term ends.  The spaces in the building range from 650 sq feet up to that 1200 square foot space.  However, bigger office spaces (> 6000 sq feet) in Greenville, SC have had a harder time it appears, which seems consistent with some other metro areas.  

Love Class B Flex Industrial…16-20' clear ceiling heights with either dock high or grade level roll up doors (or a mix of both) with a small office footprint to complement the warehouse in the leased space. Agree with some on here that these aren't competing with Amazon, massive box buildings, or major manufacturing facilities. We have leased to regional/national food distributors, information technology firms, contractors, etc that range in size anywhere from local smaller businesses to large national credit tenants that need those spaces that fall well within the Class B building type offering. On NNN leases typically to boot.

Quote from @Courtney Nguyen:

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Quote from @John McKee:

There is always something to learn as I add to my checklist.  One of the things that I need to do a better job is to button up future leases on the HVAC system.  Some of the leases I have inherited are vague on the responsibility of these systems.  Typically the tenant will maintain and repair and the landlord will replace.  What I come to find out is that some of my tenants have done a poor job of maintenance, thus shortening the life of the unit.  So going forward we will implement an amendment to the lease to insure the tenant has secured a semi annual maintenance contract.  In some cases the cost of the unit will be shared by both parties. 

Great idea to require the HVAC vendor service contract, or at the very least a copy of the preventative service visits if they just want to engage an HVAC company ad hoc (and if they don't you can get the service performed and bill back the tenant, but also include that language!). Having a clearly spelled out clause of responsibilities for repairs and system replacement on the HVAC system can help clear up this issue. This also includes other types of repairs, such as roll up doors, etc. Repair issues have been the main thing that I have gotten calls about from my NNN tenants, so I have my own "lessons learned" on ensuring newer leases are crystal clear.

 @Jade S. can you share what's on your lesson learned list?

Courtney, here are a couple of things I've learned with my multi-tenant commercial properties with NNN tenants over time:

1) Clearly spelled out tenant repair/maintenance language in the lease, so that I can reduce the number of questions I get from tenants about repair issues (especially in the event that something needs replacement)

2) HOW MANY parking spaces each commercial tenant has access to and asking how much parking is required prior to placement of a new tenant! Previously as a neophyte landlord I left it to the tenants to figure this out my first flex industrial building has 2 parking spaces per 1000 sq feet.  But no more as it caused issues with my tenants parking all over the lot, which led to a bit of grumbling with both tenants.  Especially in a situation where one tenant is a distributor and the other tenant is a service provider for a major cable company with several work trucks.  

3) Establishing a cadence of communication with each tenant.  In the past, sometimes things like roof leaks were not always reported in a timely manner.  But nowadays, I have established a good communication channel on issues, such as landlord responsible repairs or HVAC maintenance reminders, so that they are rectified in a timely manner.

I now have three commercial properties, and applying these lessons has been quite helpful.  

Quote from @John McKee:

There is always something to learn as I add to my checklist.  One of the things that I need to do a better job is to button up future leases on the HVAC system.  Some of the leases I have inherited are vague on the responsibility of these systems.  Typically the tenant will maintain and repair and the landlord will replace.  What I come to find out is that some of my tenants have done a poor job of maintenance, thus shortening the life of the unit.  So going forward we will implement an amendment to the lease to insure the tenant has secured a semi annual maintenance contract.  In some cases the cost of the unit will be shared by both parties. 

Great idea to require the HVAC vendor service contract, or at the very least a copy of the preventative service visits if they just want to engage an HVAC company ad hoc (and if they don't you can get the service performed and bill back the tenant, but also include that language!). Having a clearly spelled out clause of responsibilities for repairs and system replacement on the HVAC system can help clear up this issue. This also includes other types of repairs, such as roll up doors, etc. Repair issues have been the main thing that I have gotten calls about from my NNN tenants, so I have my own "lessons learned" on ensuring newer leases are crystal clear.

Quote from @John McKee:

Agreed with apartments, but that is tricky because the conversion can be costly.  I see more partnerships happening with developers, owners and the city to revitalize those areas. The city could give the owner and developer tax breaks until the conversion is complete.  I stay away from the CBD and focus more on the neighborhood districts because that's where the people are.

Boy, couldn’t agree more on this.  We have a 7500 square foot office building in a small historic CBD within close walking distance of restaurants/parking deck/apartments in the upstate of SC that is between Greenville and Spartanburg.  It’s currently fully leased, but I know downtown Greenville has several large spaces that are still empty as the pandemic has waned.  

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We did exactly that with a two story commercial office building our LLC owns in the Upstate of SC. It is an electric lock system that unlocks in the morning and locks around 6 pm local time daily (except weekends and holidays), and my property manager has an app that can monitor all of this (as well as lock/unlock the doors outside of normal hours). The tenants seem to like the system, and it saves the trouble of locking with a key on a daily basis. But definitely price out the different systems to match what you need.

 Mind sharing the cost and year?

Hey @Ronald Rohde...we spent around $1550 per door last year to install the system, and there is a $20 monthly monitoring fee on those three doors (the building will logically need internet service as well for the monitoring needs).  We also had the keypad option installed for tenant use during the after hours times.  We don’t have a high volume of tenant employee staffing in the office spaces, so we opted not to do a key card option.  

We did exactly that with a two story commercial office building our LLC owns in the Upstate of SC. It is an electric lock system that unlocks in the morning and locks around 6 pm local time daily (except weekends and holidays), and my property manager has an app that can monitor all of this (as well as lock/unlock the doors outside of normal hours). The tenants seem to like the system, and it saves the trouble of locking with a key on a daily basis. But definitely price out the different systems to match what you need.

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Hello all,

I'd like some input and feedback on underwriting NNN deals; is it simply subtracting debt service(s) from NOI over the course of the lease? (Of course adding rent bumps, etc)

I know each lease is different and landlords may cover additional expenses with NNN such as the parking lot, but as a first-pass, "quick and dirty", is this a good way to start? Am I missing a key component?

Pretty much, @Paul T...those are the rough basics. The opinions you have heard already are pretty good considerations. One thing I will add is if you do charge back any of the NNN costs (e.g. property taxes, insurance, etc) that you pay directly according to any lease terms, you will need to consider annual NNN reconciliations for those tenants. This will allow you to recapture excessive expense costs above the NNN estimates you may have planned, or reimburse the tenant if you come in under those estimates. Good luck!!

@Deren Huang - Congrats on the deal! Getting that first commercial industrial building is a big event.  Maintain some good, deep cash reserves for any aspects of the lease that you are responsible for and any future tenant improvements/roof replacements you may need to cover down the road.

Just curious...since you are potentially up for a need to re-lease the property in 2 years if the current tenant does not exercise their option, how does the market look in Tulsa with industrial type tenants (vacancy rates, etc)? Also, how many dock high and grade level doors do you have on the building? And what are your clear ceiling heights? You definitely have an interesting Frankenstein building for sure!

Good luck with running the building and with the existing tenant! And keep that cash flow going!

Quote from @Jack Perfett:

Matt -  As a project manager in the industrial area we never put AC in a build like this. Look into installing MAU's with louvers to keep air circulation. This should keep the building at a reasonable temp roughly 70 degrees. If that still is not sufficient look into adding Big *** Fans. That's actually what there called lol. Don't know the price difference in comparison to a HVAC system but certainty something worth looking into! Hope this helps

 @Jack Perfett - Following up on your comment. What is the rough cost of installing a MAU in a warehouse type space in the 15,000 sq foot range up to 40,000 sq feet? I also love the idea of the Big A#@ Fans...we have those in one space of a 12,500 flex industrial building that my LLC owns that the tenant will run in the summer. Does a pretty good job, even in the Southeast.