Real Estate Deal Analysis & Advice

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Shane Melanson
  • Developer
  • Calgary AB
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Case study of a Retail Development

Shane Melanson
  • Developer
  • Calgary AB
Posted Sep 9 2019, 10:05

Investment Info:

Retail commercial investment investment.

Purchase price: $6,500,000
Cash invested: $2,100,000

Retail Development - ground up. Purchased 1.6 acres of land and pre-leased 1/2 site to anchor tenant. Now, pre-leasing building 2.
Expected to 2x capital invested in 24 months.

What made you interested in investing in this type of deal?

Scale- has potential to return $3-4M in profit.
2x on our initial equity
Good fee's earned durring the construction and lease up phase
Able to secure pre-leasing prior to going hard

How did you find this deal and how did you negotiate it?

We found deal direct from vendor.
Previous buyer choked and we stepped in and closed

How did you finance this deal?

We purchased land - call cash (2.1M). Raised the equity in 7 days from LPs
We secured construction financing for phase 1 with preleasing in place from national tenant. This was banking relationship- no broker involved.

How did you add value to the deal?

We rezoned the land (to expand uses)
Leased up the entire site
purchased raw land and developed 14,000 sq.ft of retail

What was the outcome?

Currently - we have a project worth $5M (with 4M in). Once we lease Phase 2 (working with several tenants now) - value will be $8.7M-9.5M pending rental rates

Lessons learned? Challenges?

Pre-leasing critical
Getting time to lease up and find tenants
Finding a leasing agent that is going to work- and not take the easy road
working the consultants
not accepting the first quotes or bids

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes- pretty much all:
Commercial broker (leasing)- TBD
lenders- RBC (yes)
appraisers- Colliers good
Enviro- decent
General Contractor- Longboard (highly)

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