Grocery Store Re-Development Deal

[John Hobbes]

Scenario: You are working on a deal with a major credit Grocery Tenant on a space that has been vacant for 4 years now. Would require a complete demolition and redevelopment of this existing space. LL Work/Buildout would need be ~100% financed. Would be 40k sqft of a 500k sqft shopping center.

Using these basic inputs, would you do this deal?

Deal Term: 15 Years Total Buildout/LL Cost: ~$12.8 million (prior to financing costs) Average Annual Lease Revenue: $961,500 - Total Lease Revenue estimated to be $14.4 million over term of the deal.

From a pure cash flow perspective - obviously wouldn't do this deal, but factoring in a likely exit within the next 15 years w/ a great credit tenant... Does that change anything in your opinions?