Are former banks a good investment?

Question

I would appreciate some advice and input please.

I found a recently defunct, approx 3,700 sq ft, bank bldg in excellent condition with all the office furniture, teller electronics, security system, vaults, lockboxes, parking lot lighting, LCD signs, etc, included. It’s walk in ready for another financial institution, or could easily be used for a possible medical facility.

It is approx 12 years old and the quality and location of the building is impeccable. It has a $1,250,000 tax appraisal with approx $600k of that in land value. I was told the building construction/parking area alone cost the bank a cool million, not including the land.

I notice other commercial leases in the area are going from $20 sf/y to $23 sf/y but they are not bank buildings and are not move in ready with everything needed to start operations within mere days, so I’m thinking it might bring even more rent per sq ft.

Based on the information above, what do you experts feel would be a good (for me) "cash" price offer on such a property to use as a NNN long term rental? It is not presently offered for sale, yet, but I have an opportunity to make a "reasonable" offer now.

Thank you in advance for your valuable input.

RE

Jameson Sullivan · Answer

I don't know that there's enough information here to suggest what your cash offer should be. However, in my market, Tax appraised values are generally significantly less than sales price. If this is a desirable asset, back of the napkin math shows you'd need to get higher than $23 to make it pencil. Even if you paid taxable value, you'd basically be into it for what it's worth at a 6% CAP after factoring commissions and TIA.

Again, I don't have enough info to really analyze the deal and "reasonable" means different things in different markets. If you think it's a good long term play in a market where there's lots of national tenants, then make an offer and see if you can push rents to $28 with a national FF drive thru or something. SBUX has traded around here between 4.75 and 5.4% CAP rates. If you can land that deal, you're in a good position. Smaller 2 or 3 unit franchisee, not so much.

best of luck.

Ron Edward · Answer

Waiting area to the left with 4 walk up teller windows, connected to a break room and storage room, 2 teller drive thru’s on the outside, plus an ATM. Walking through the front door a large vault/door greats you. Space to the right is open with 3 desks situated, behind these desks are 4 decent sized rooms with one being a conference room. The open area could be converted into more enclosed office spaces for a specialty medical center, chiropractor, urgent care, etc.. Large bonus upstairs staircased unfinished area, not part of the 3,700 sq ft. This could also be finished out for more rooms or left as storage.

Based on comps, I can see getting at least $23 sq ft/yr as a NNN lease.

What’s your assessment for a cash offer?

Based on comps, I can see getting at least $23 sq ft/yr as a NNN lease.

What’s your assessment for a cash offer?

Steve Morris · Answer

How is it laid out? Plenty of parking and/or drive-thrus?

Can it be easily repurposed and does zoning allow it? Have an ex-bank they turned in to a SBUX?

Floorplan? Is it wide open or lots of little rooms?

$1M at 4% = $4775/month. So debt is about $15.50/SqFt/year. What do you think you can get NNN at?

Don't think the furnishings would be worth that much to a new tenant.

Are former banks a good investment?

3 Replies