Multi Tenant Office building purchase
Hi, I have an office in a multi tenant (5 in total) office building and it is up for sale (estate sale).
The selling broker seems reluctant to share the rent roll, P+L, etc. until an offer is signed. Seems unconventional to me as I can't do and due diligence. I have a lease that ends in 28 and then a couple 5 year options to renew. They just raised rents for the other tenants and signed a 1 year lease and then month to month. I occupy about 20% of the building.
There is a ton of deferred maintenance, the landlord was a DIY guy and so expenses are as minimal as possible. I have an OPTION TO ACQUIRE where it depends on FMV based on Lender's appraiser. From the broker, Annual Gross Income of $79,236, Expenses of $27,411, and a NOI of $51,825. With a $1.3 million asking, that's a 4% cap rate which even in this area seems generous given the lack of maintenance.
2026 county assessed value
$1.30M $843k land / $464k improvements
Was trending upwards, but this year went downwards due to improvements
I have an OPTION TO ACQUIRE where it depends on FMV based on Lender's appraiser. The selling broker brought in an "appraiser" that seemed more like a friend. I will bring in a lender's appraiser.
A couple questions:
1) The rents expire next year then move to month to month, will that affect lending? As long as I don't increase price, the tenants say they will stay. They say they are ok with raising rent if there is maintenance/improvements.
2) The rent is somewhat under market, as far as mine is concerned (probably by at least 20%). They raised the other tenants recently. That would make the low cap rate seem more tenable
3) For the appraisal, I understand there are 3 methods to evaluate the property. The current NOI and asking price puts it at a very generous 4% cap rate
4) If I decide to go with the full appraisal, what option is there to be sure it's not over the current asking price?
5) I haven't hired a broker myself. I feel like the acquisition is in the contract. But I don't want the negotiations to be in bad faith (e.g. give all the rent rolls, P+Ls, etc.) and the real estate tenant mentioned they may be interested in acquiring the property. How would I approach this with the selling broker? I am going to hire a real estate lawyer but should I look at using a broker myself?
Thanks!
