I am currently looking at a 5300 sq ft center located in Colorado. Here are the details for such.
Asking Price $2,110,770
Occ. 100%
Lot Size 1.19ac
Cap Rate 6.75%
Year Built 02
Net Lease Investment
Gross Income $142,477
10 year lease remaining on lease with admin and mgmt fees built in.
One side leased to Starbucks, other side to Blockbusters.
I would like to know if this would be a good sound investment.
Thanks
Screw that...if those are the type of commercial deals around Colorado. I would hope you could find better deals for $2million. I like Blockbuster...but not that much
You'd be better off putting money in the bank..cause your rate of return would be equal, and you'd have no risk
I
[ Edited by garyzan on Date 08/11/2007 ]
I agree, the only thing I can see is if there is some income from a percentage rent clause associated with any of these business which could potentially take your return higher. As presented, it's a definite pass.
mimoca32 is right. 7.5 CAP would be more appropriate in this market Additionally look at the tenants, while Starbucks is strong, Blockbuster is not the best right now with Netflix chomping away at their business right now....
look on ****Must participate a while before posting URL's*** there are some commercial investment that will give you 60% ROI
IF YOU DONT ASK. YOU WILL NEVER KNOW.
What else is around the Starbucks/blockbuste?. Is there an anchor tenant around your location or is it a standalone with no other access to retail. 6.75% might be the right price depending on foot traffic and likely hood of being able to rent it out quickly to another tenant. Most quality NNN properties have a cap rate of around 6-7% so you might be in the ball park.
I have a couple of comments. You state the Gross Income is $142,477. Based on the rest of your numbers, that should be net. Essentially NOI Net operating income. NOI=Cap Rate x Price.
So, making a few assumptions, 20% down and a 7% rate at 25 year your annual debt service is $143,217. That plus your expenses means you will be dumping cash in your investment. And all the Blockbusters in my area have all closed.
Not a good sound investment at all..... Run away...
[ Edited by dno on Date 10/23/2007 ]