Re: Income producing properties. - Posted by Terry H
Posted by Terry H on March 19, 2006 at 14:03:25:
Chris, we own some vacant ground as well in the area with plans to develop at some point. However, right now there is a sign out there (Pre-lease space so on). We get calls from small business owners, brokers and we simply tell them we are still in the entitlement stage of the development but “what are you looking for, we may have something else that would work for you?”. This gives us a contact, phone so forth and if we don’t have something we start calling brokers to find a building for sale with vacant space. Contracts are written with contingentcies and then you show the building.
Answer to number two is; once the building owner is under contract it’s hard for him to kill the deal (plus he probably wants to sell anyway and move on. Tenants can pull out at the last minute as well and you have some risk. Tenant doesn’t care who he’s working with (us or the current owner) as long as he is getting the lease rate that he is happy with. There’s always risk, but in this case I personally knew the tenant and it was a lock for us.
Totally different deal: I had this 8,000 sq ft building under contract with extensions out to Feb 15, 2006. One tenant already in the building had a master lease (so they should have been paying rent all all 8,000 sq ft). In doing my due diligence I come to find out the tenant is not only NOT paying rent on all 8,000 but he was only paying what he could afford to pay monthly. I could ahve killed it right there, the owner misrepresented the building and the lease, but a broker found out I had it under contract and had a user for the entire building. A few weeks later the tenant that was in the building files Chapter 11 and is kicked out. So now I’m working with an empty building and a possible tenant. The owner found out about the tenant and wanted to kill the deal, keep it for himself, but because I had the right to extend he couldn’t do anything about it. So now it’s a race against time, get the tenant comfortable with the building, get the city comfortable with the tenant and get myself comfortable with the financials of the new tenant… Long story short, I couldn’t get comfortable with the tenant (didn’t like the business plan that much), so I killed the deal. I think they may have worked something out with the current owner, but it’s been a month and half and I still don’t see work on the building (had large requirements for changing the build-out) and I didn’t want to carry it very long with a already shaky potential tenant. It’s a crazy business and my partner always tells me, “there is no loyality out there”…