Is the broker screwing with me, or just not smart?

4 Replies

I'm evaluating this commercial property and asked the broker to send me the offering memorandum.  But it doesn't make any sense, so if you guys can give some advice if they might just be making mistakes, or screwing with me:

The GSI (Proforma) shows this:

A --- 9,400 sqft --- $3,000

B --- 14,300 --- $2,000

C --- 25,600 --- $3,500

C --- 3,127 --- $1,750

D --- 2,400 --- $2,036 (A quick google search has the Tenant as having moved to a new location)

E --- 2,000 --- $1,200

F --- 2,600 --- $1,500

G --- 7,000 --- $1,300

Vacant -- 11,000 -- $0

Monthly $16,286, Annual $195,432  

According to the 2014 Proforma there's ~75,000 rented square feet. @ .2451/sqft!  With the biggest tenant at 13.67c!

But then they give another list of Rents for a previous year: 2007

A --- 9,308 sqft --- $5,000 <--- Sqft is rounded in 2014 PF

B --- 14,300      --- $8,000      <--- They got a huge deal in lease reductions!

C --- 2,823         --- $1,550  <--- I can't imagine they increased their footprint by 10x and only got a $1,500 rent increase!

D --- 2,567           --- $2,00

E --- 2,600           --- $1,850

F --- 2,000           --- $1,200

G --- 2,575           --- $1,550

     H --- 7,000          --- $3,500

I  --- 4,505            --- $2,251 (Tenant no longer on 2014 listing)

Vacant -- 17,997 -- $0

So theres an additional 12,000 sqft in 2014!  No new development has been built out.  Tax Records confirm the 2007 square-footage of ~65k.  

So I guess with all that, are brokers really that careless with listings and property offers that they send conflicting rentable square footage numbers to someone looking to buy. 

I know there is opportunity here, the going rental rate in this area is .53c / sqft and it is on the outskirts of current development.  


I work as a lender.  It amazes me how often a commercial real estate broker screws up an operating memorandum.  I typically see something like this:  GSA property with a 15 year firm term lease.  When you read through the OM, you eventually find out that the GSA has an out at 10 years, or that the original lease term was 15 years, but you only have 4 years left.  As a lender, I feel as if some of these agents waste my time.  Occasionally, you find a good agent.  Joel Owens, who is on BP, does a good job of representing his buyers and presenting an accurate picture to the lender.


@Mark Creason -- It boggles my mind that Brokers who could be making 2.5MM @ 3% $75,000! wouldn't have a VA or Assistant be able to check what they are posting is accurate, and interesting to investors! But I suppose I should find all these brokers and sniff out their deals as they might be badly priced and or represented and become better deals for me.

Doubtful he's either trying to screw you or is stupid, @Troy Fisher . Probably just lazy. To me, that spells opportunity. You might want to review all his properties.

Some years ago we were represented by a small local broker we knew here in L.A. on an out of town property offered by a friend of his at Marcus and Millichap. With obvious capital expenses taken against the prior year's income, M&M grossly understated the NOI. Plus, lots of crazy stupid math errors. For what they wanted, the place was a cash cow and their set-up looked like it was prepared by the Keystone Cops.

We sent our evaluation to our broker and he agreed with our assessment. Then he kidded he'd have to call his friend at M&M to let him know!!!! I swear I thought he was joking, but reminded him whom he represented and made him promise and swear to keep his mouth shut. Professional that he was, of course he agreed.

Next morning I received a call from the M&M broker profusely thanking me for my spreadsheet and detailed evaluation and that he'd promptly be sending me their updated circular – with a new (stratospheric) asking price, of course. Out of courtesy, I'd be the first to receive it. Gee thanks.

This was years ago and the last time I ever let a broker represent us.

(For what it's worth, I learned our broker went BK shortly thereafter and I think was also investigated by the SEC for pooling unaccredited investor money into LLC's he'd invest in apartment buildings. Fortunately, we avoided that mess, but many of our investor friends did not. Live and learn.)

Originally posted by @Jeff S:

Doubtful he's either trying to screw you or is stupid, @Troy Fisher. Probably just lazy. To me, that spells opportunity. You might want to review all his properties.

Seeing as I am trying to learn how to evaluate properly commercial properties and learn how to find the right one that fits my risk profile, goals, and ambitions, I'll continue to use a broker.  and I'll use this as a swivel point in my learning that if a broker is being so lazy, that it could spell huge profits for me in the future!

Thanks for the feedback and the story!

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