Posted by ray@lcorn on August 16, 2007 at 14:46:24:
My guess is the prospectus assumed the buyer would be able to re-let the vacant space for higher rents. That’s what typically passes as upside potential in the broker universe.
I also would guess that there is a good reason for the mass exodus of existing tenants. Before I went any further I would have to know what that reason is… perhaps a new center opening elsewhere in the market, or the locus of retail activity has moved completely, or the market is declining in general (decreased population and employment), etc.
In short, I would not make an offer based on the info you’ve shared so far. If after doing basic market research you believe the center is a turnaround opportunity, then would be time for a look at the current leases for valuation on the actual income, not projected lease rates. Don’t be surprised if the true value comes in much, much lower than the asking price.