HELP 100% Complete/ 100% Vacant - Posted by Steve Wiley

Posted by Steve Wiley on October 29, 2003 at 18:05:49:

I’ve come across an interesting property.

8500 sqft retail center on hard corner (50-60k traffic pday)
Owners are not speaking (best friends)
2nd generation building just completed.
Building is 100% complete, but not leased.
Owners built building wrong (my opinion) in order to lease to multiple tenants. 2 spaces 1-700 sq ft approx, and 1->7,000 sqft.
They made no provisions for plumbing, or separate electric meters. Looked like one would have a styling salon (700sqft) and the other would put an office in there.
I’ve started due diligence, here’s specifics:

Asking 1.1 million
Comps are going for about $100 per sqft
Cap rates are between 8&9 in this area
No operating income.
Comp leases are $14 to $15 NNN (Just negotiated one 3 blocks North on same street)
850k proposed purchase puts it at about 10% cap rate in my property analyzer.
30k (approx) to divide

I am thinking of offering 525k 15% Cap Rate
Debt coverage All mortgages 2.13
Debt coverage 1st mortgage 3.05
I’ll occupy the prime spot-3000 sqft
Averaging 5-20 calls per day for leasing
With the offer is the list of due diligence items that will have to be provided, etc.

What is the best way to establish this property value since there is no income currently. Doubtful the owner will be able to lease (I suspect no cash for dividing), so value should remain low.

Thanks in advance-Steve