All Forum Posts by: Mark Dante

Thanks Joel - Would you have the tenant pay the property taxes on land as well or just on the improvements?  

I advertised a piece of land as a 'built to suit' and I was contacted by somebody interested in just leasing the land/pad.  He will put up the building himself and own it.  

What happens with the building at the end of the lease?  Who owns it?

Any other advise in dealing with land leases is appreciated as well.  

Joel - It is basically a strip center that is 70,000 square feet and two free-standing buildings each about 3000 square feet.  The seller may be financing the deal and I don't expect them to be nearly as cautious (requiring excessive coverage) as a conventional lender would.  My question is more along the lines of "What kind of coverage should I obtain?" as opposed to "Is the seller hiding expenses?" 

Eric - It is funny that you mentioned 'exercise facility' because one of the tenants is a chiropractor that operates a rehab center.  In addition, I have been talking with a gym about possible tenancy.  So are you suggesting that insurance will be much higher with a gym as a tenant?  You mentioned that general endorsements should be included.  Can you give me an idea of what you'd recommend?  

I am looking into a strip mall that is for sale and am int he process of doing my due diligence.  I have placed a call into an insurance agent but I am wondering if there is anything in particular I should be asking.  Any sort of coverage or special coverage that is recommended for strip mall?  Any other thoughts or guidance would be appreciated.

thanks in advance!

I do not intend to sell the separate restaurants. They are included in the (potential) purchase of the plaza. So the seller is asking $1.5MM for a 75K sq/ft plaza which also includes the 2 other buildings each of which is 2500 square feet.

So it certainly sweetens the deal considering they are leased up. Now I haven't seen the leases yet so I'm not sure who is the guarantor however the seller is the owner of several properties (hundreds) so I suspect they insisted on having the parent company be a guarantor as well.

I will e-mail you off-site as I get more information/specifics.

Mark

Both restaurants are national chains. The one property is actually a ground lease only. It doesn't generate as much rent but I feel confident they won't be leaving any time soon considering they own the building. The other property is tied up until 2026. And these are NNN. These 2 properties alone cover a good portion of the nut.

My concern, of course, is the large plaza which is mostly vacant. At the asking price, I am hopeful that I could ask well-below market just to get it rented and I'd turn a profit. But at that same time, I understand tenants looking to take 20, 30 or 40K square feet don't grow on trees.

Somebody had mentioned in another thread that there are (pricey) reports that one can purchase that could provide market information including (possibly) lease/rent information of similar properties within a particular radius. Are you familiar with such reports? If so, do you know where I could obtain these? Also, do you know of any resources/books etc.. that focus on strip plaza investing?

Thanks again

The property is 75,000 square feet plus two additional stand alone buildings which are each approx. 2500 square feet. So we are at approximately 80,000 square feet. Asking price is $1.5MM. The quote for a new roof is $300K and new asphalt for parking lot is $200K.

I have contact leasing agents/brokers about some other property which we own and they basically won't talk unless you want to list the property to sell. Now those were small, stand-alone restaurants, but you'd think brokers would be looking to make $ considering the market the last few years.

In any event, the property is in below-average condition in an economically depressed town. The stand-alone buildings are currently leased up for at least 10 years. The leases in the plaza appear to be going month-to-month.

Lining up tenants is a bit of a concern. I just don't know how to go about negotiating when I do not own or have control over the property. Another poster in a different thread had mentioned using a Master Lease with Option to Purchase. I'm not sure if the seller would be open to that just yet. And I don't think a big tenant would be willing to sign a Non-Disclosure Agreement (though I may be wrong).

Issue: How do you analyze a strip mall?

Here's the situation. I've got an opportunity to invest in a small strip mall. The property needs work and is less than 30% occupied. I've gotten a few quotes on needed repairs. Let me preface my questions but stating that I do plan on having CPA assist me in doing my due diligence. Off the top of my head, I've got the following questions:

1. Seller has provided figures from 2012. It is basically a 1-page Profit & Loss sheet and is certainly not something I would rely on by itself. What financial documents should I be requesting? (I'm sure the CPA will know what to ask but I'm just curious.)

2. Even if the 2012 expenses listed are legitimate, I am thinking evidence of why the strip hasn't succeeded can be gleaned from data. What are the typical operating expenses associated with a strip mall? (For example, the management fee seems really low....I am wondering if the sellers refusal to pay for professional services is resulting in the low tenancy.)

3. The success of this investment is contingent on getting tenancy to 65%. I know the area well and there is a need for a few types of stores in the area. Given the low asking price (relatively speaking), I feel as if I can reach 65% by asking below-market rents. However I am speculating at this point. Obviously, I do not know how much the competition charges. Are there any services/resources that provide data such as the average market rent in an area? (For example, I'd like to know what type of rent per square foot a supermarket looks to spend.)

4. I understand there are different ways to structure a lease, whether it be gross or NNN or modified. Given the condition of the property, a lot of work will be needed on the interior for the prospective tenant. Would the landlord typically provide an allowance to the tenant? Or would the landlord build it out and then increase the rent accordingly?

Thanks in advance for any advice. And if you can suggest any materials/websites/resources pertaining to investing in strip malls, I'd appreciate it.

Thanks

I have contacted a bank about a commercial loan but I just wanted to compare it to what some of you guys are seeing.

I'm looking at a strip plaza. LTV would be under 50%. A local bank is telling me 4.5% for 10 years, amortized for 10. Have you seen any banks doing loans for 15 years? How do the rates compare?

Thanks