Retail Shopping Center

I'm putting together my first Retail Commercial Deal. There is a < 2% decline in the population within a 5mi radius. One of the major tenants CVS is moving out of the center into their newly built Stand Alone bldg across the street.
On the other hand, there is an increase in population in the next town which 15mi south. There is also a new Plant opening in this town which will be bringing in approx 1700 new jobs.

Should I be worried about the population decline around my Shopping Center?

Well as a general rule you should worry about everything.

That said estimating population in a 5 mile radius is a pretty tricky thing and anybody who believes they can do it to within 1% must have a pretty good sense of humor.

I'd be more worried about replacing the CVS income.

CVS leaving the center is a red flag. The have great acquisition people. I'd stay away.

Yeah except the CVS is moving across the street-- means that they basicly like the area. And while CVS does have a very aggressive acquisition team I wouldn't worry too much about a tenant who moves into their own space. Seems to me its as much a vote of confidence in the area as otherwise.

Losing a major tenant is always a problem but fixable. I would check into the feasibility of replacing the anchor. How long will it take? Ask some lease brokers to do a market survey. Are you looking at 6 months of vacancy or is Walmart banging down your door? Do you have the cash to carry the property for 6 months at a negative cash flow or will the property cash flow with out the Anchor?

I would NOT include the CVS lease in your calculation and multiply the cap rate against the NOI with out the CVS lease. The bank will not count it so why should you. You pay for the cash flow the building is throwing off now, not in the future. Brokers will always tell you how much upside the property has. Fine, but I don’t pay for upside or imaginary cash flow. Mr. Broker, come back when we are talking real numbers.

I hope that helps. Feel free to P.M me. I am looking for opportunities.

Thanks

Daniel Valle

I agree with those who say that CVS moving across the street is a sign that they, at least, have confidence in the area.

What I have not heard from you yet is HOW you intend to find a renter to take their place. Are you going to advertise? Hire a finding firm? Put up a sign and hope? [addsig]

Thanks for the Advice.

The seller isn't willing to reduce to price to compensate for the CVS vacancy. So I decided to pass on the deal. Replacing CVS would be a difficult task given that it's a small town.

I think this deal is really meant for a developer or someone with the ability to replace CVS immediately.