Help me analyze this NNN deal

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[Joel Owens]

The medical tenant is the larger anchor for the center so it is really KEY the lease details of that tenant, the rental increases they have, guarantee of the lease, if corporate or personal financials disclosed, etc. They represent a big stability in the center and the overall expected cash flow and NOI.

Next you need to look at the smaller tenants are they multi unit operators or single unit to mom and pop?

With this virus thing going around they might not be able to survive the hit to their businesses.

Some of my clients we are buying retail centers but only for A locations with very strong tenants. Right now if you buy smaller tenants with the economic downturn they might not survive. I only want that if the rents they are paying are way, way below market leaving me a ton of upside. I rents are close to market by a few bucks a foot then no way.

My clients right now would rather own a single tenant deal at 3 million with a long term lease and credit investment grade tenant for a 6 cap with debt at 3.8 to 4.0 fixed for 10 years with a 25 to 30 year amortization then a retail center at 6.5 or so. The delta isn't there to be worth their while and interest rates on retail centers are typically higher than STNL about 4.25 and up.

Being your center is around 1 million then loan under 1 million not many lenders will touch it. Generally means rate like 4.6 to 4.75 or higher.

With virus going around tenants on new lease ups are dragging feet waiting to see what happens in next 3 to 4 weeks if peaks or gets much worse with no end in sight before they commit fully. Additionally being built in 2006 roof is 14 years old. Depending on roof that was put on you could have a 14 year old roof with 1 year left on it or best case maybe 5 years left. Roof and parking lot are huge expenses even if can be passed on to the tenants they can't take the additional to CAM all at once so landlord pays for new stuff and gets reimbursed over a long period of time. I like to get credit from seller at closing to pay for these items so it doesn't tax the tenant CAM and or I am not paying a big expense upfront that is going to suck down the cash flow.

The smaller MTNL properties unless local and can rack up many are almost too much trouble than they are worth for the minimum NOI they throw off. You have to analyze what is the return and what is the potential NOI generated for the headache factor and is it worth it?

It's hard to comment further without knowing your specific situation or purchasing capacity that would dictate possible retail investment options.