Industrial Deal! 10k/mo NNN Lease

Deren Huang

Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes

Hello All!

Grateful for this community.

I wanted to share a deal I recently closed on in Tulsa.

This is a 25k sqft manufacturing building, as you can see, it has been added on multiple times.

I may lovingly call it my Frankenstein building.

It had a 3 year NNN lease attached to it, with approx 2 year left, and an option to renew for another 3 years.

Purchase: $1,100,000

Rent: $10,000.00/mo + NNN charges (I still can't believe this is a thing)

Debt Service: $5,887

Cashflow: $4,113*

COC: 17.26%

*This does not include reserves for vacancies, etc

Next steps is to raise capital to get more deals like this!

I AM LOVING INDUSTRIAL!

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Jade S.

Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes

@Deren Huang - Congrats on the deal! Getting that first commercial industrial building is a big event. Maintain some good, deep cash reserves for any aspects of the lease that you are responsible for and any future tenant improvements/roof replacements you may need to cover down the road.

Just curious...since you are potentially up for a need to re-lease the property in 2 years if the current tenant does not exercise their option, how does the market look in Tulsa with industrial type tenants (vacancy rates, etc)? Also, how many dock high and grade level doors do you have on the building? And what are your clear ceiling heights? You definitely have an interesting Frankenstein building for sure!

Good luck with running the building and with the existing tenant! And keep that cash flow going!

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
4y
@Deren Huang Congratulations.
0 Reply
Jade S.
Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes
4y
@Deren Huang - Congrats on the deal! Getting that first commercial industrial building is a big event. Maintain some good, deep cash reserves for any aspects of the lease that you are responsible for and any future tenant improvements/roof replacements you may need to cover down the road.
Just curious...since you are potentially up for a need to re-lease the property in 2 years if the current tenant does not exercise their option, how does the market look in Tulsa with industrial type tenants (vacancy rates, etc)? Also, how many dock high and grade level doors do you have on the building? And what are your clear ceiling heights? You definitely have an interesting Frankenstein building for sure!
Good luck with running the building and with the existing tenant! And keep that cash flow going!
1 Reply
Account Closed
Investor · Atlanta, GA · Member since 2017 · 174 posts · 104 votes
4y
You might be overstating your CoC by not setting aside $ for future Capex, TI, leasing commission, management fee, and accounting/record keeping costs. You might not care about these costs (for various reasons) but, at exit, your buyer will/might care. So make sure you factor these expenses in your NOI calculation.
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 804 votes
4y
congrats on the deal! does the tenant actually cover the cost of a new roof or repair. what about the parking lot. just want to make sure your getting a true triple net
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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Congrats! I own 100,000 sq ft of industrial in DFW. Just closed on another 5.5 acres last month too
What is the market like in Tulsa? Some of my clients invest in OK, but also have some scale...
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Deren Huang
OP
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
4y
@Jade S.
Good call on the cash reserves, I had convo's with the tenant and they plan on exercising option, they have built out the facility extensively.
Market is good here, approx 3-4% vacancy.
We have 3 grade doors 1 dock high.
12-14 clear height, majority climate controlled.
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Deren Huang
OP
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
4y
@Account Closed
the % was for clickbait =), I have decent reserves and will skim off the top for additional until the renewal
0 Reply
Deren Huang
OP
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
4y
@John M.
The lease structure is not an absolute NNN, I am responsible for the roof they are responsible for everything else. The % was clickbait =)
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Deren Huang
OP
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
4y
@Ronald Rohde

Market is really good for landlords haha, probably not like Dallas and other metros. I heard some places have less than 1% of vacancy...
Attached are some screenshots of the analysis from JLL for the appraisal.

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Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
4y
Quote from @Deren Huang:

@Ronald Rohde

Market is really good for landlords haha, probably not like Dallas and other metros. I heard some places have less than 1% of vacancy...
Attached are some screenshots of the analysis from JLL for the appraisal.

Yeah you can definitely cash flow. I just worry about my exit.
0 Reply
Deren Huang
OP
Real Estate Agent · Tulsa, OK · Member since 2016 · 408 posts · 242 votes
4y
@Ronald Rohde
The tenants have improved the property significantly by installing climate control in the majority of the space. The lease rate doesn't include the space being climate controlled, so the option being exercised is a high chance, and if they default or move out, I can jack up the rate based on the market and improvements. (run on sentence, don't judge)
Also, an owner/user could be a play for exit.
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