All Forum Posts by: Cason Acor

Quote from @Shawn Taylor:

@Cason Acor what’s the name of that large development you’re talking about in Salt Lake?

It’s not in Salt Lake. It’s 400,000 SF across multiple projects in Utah County. 

@David Kim I’ll need a little more info. What specifically is the commercial property you’re wanting to sell? Is your property fully occupied? Will you be marketing it as an investment sale? If it’s fully occupied, how does the current rate fair in comparison to market rates?

I’m a commercial agent that specializes in investment sales. If what you’re selling is an investment property, than the income based approach is what should matter most to you, because that’s exactly how a buyer is going to put a value on the property as well. 

When an income based approach yields a value lower than comparable sales, that usually means your rents are under market. Without knowing anything else about your property, that would be my first assumption. If that’s the case, you’ll have a hard time getting any interest at the higher sales comparable number. Why would someone pay a higher price when the income doesn’t justify the cost? Gone are the days of being able to sell properties on pro forma. 

Quote from @Brad Johnson:

Thanks for the feedback @Cason Acor. What I was looking at was strictly office space around 2,500sq ft that was in the same complex as the contractor garages. I know the garages themselves are a hot item, but wasn’t sure about a small office space in the same complex as the garages. I think a combo between the too would be a great option to own but that’s few and far between. What are contractor garages leasing out for currently? 

I've seen them go from $1 all the way up to almost $2/SF depending on location and building condition.

There's significantly less demand for something that's strickly office space. If the offices are suburban but still well located, then you can still find tenants for an office in the 2500 SF size range. It just won't be a small contractor becuase like Henry said, they don't need it. 

I'd also recommend looking into a company called Stanza. They're basically an AirBnb but for office spaces. Could be a creative way to fill a unit like that. I can get you the owner's contact info if you're interested.

@Adam Oldham yes, absolutely. A good template for small units is one, maybe two offices that are 150-200 SF each, a restroom, maybe a kitchenette, and the rest can be warehouse/workshop space. And make sure you have a 10x12 roll up door to fit a box truck. 

Quote from @Brad Johnson:

Curious to what market demand might be for a smaller office/flex space next too a bunch to contractor condos? Would seem like a good opportunity for a rentable space for contractors to meet clients or would it be better to look for a longer term lease? 

I’m a commercial agent in the Salt Lake area. I’d echo what Henry has already said. What our market needs is more smaller warehouse and flex
spaces. Think 2,500 SF or less. I’m tracking about 400,000 SF worth of new developments in Utah County that will all have units of that size and they’re filling up fast. 

I listed a 1,300 SF warehouse space in Orem for lease a few weeks ago, and got a dozen calls in the first two hours and it was a literal race among the interested tenants to get to the unit first. At the time, it was the only space less than 2,000 SF that was available in the entire county. 

Feel free to DM me and I’d be happy to chat more or answer any questions. 

Quote from @Rebecca Brannon:

Quote from @Scott E.:

How common is this? Extremely common. 9/10 offering memorandums are basing their cap rate off of pro-forma numbers and basing their actuals off of estimates.

I wouldn't call it a sloppy or dishonest seller. It's just the industry. In my opinion, the brokers should be more polished about what they are advertising.

Regardless of who is to blame, this is why you get a 30 day feasibility period. Gotta do your own due diligence.

 So are price adjustments also very common in the industry in this situation when the offering memorandum does not reflect the real cash flow?

Apparently others in this thread have had different experiences than I, but a price adjustment in this scenario is more than justified and I see them all the time. Like others have said already, it’s all about the numbers. If the numbers don’t work in light of new information, your options are to walk away or adjust your price until you’re comfortable with the numbers again. 

Don’t waste your time. It’s sat for a year because the seller is unreasonable and will continue to sit until they wise up or someone is foolish enough to buy it. 

They know what’s wrong with it. Someone with your thought of “it’s almost too good to pass up at this price” is exactly the buyer they’re looking for. Someone who will buy it quick, without looking too deep, and then all the issues are the new owner’s problem. I’m certain that as a condition of closing they’d make you absolve them of any liability for environmental issues. 

You’re over thinking it. If everyone worried about what rates are going to be in ten years, no one would ever buy anything. That information is literally impossible to know.

You have a sweetheart deal on your hands. If it’s not too good to be true, then take it. You’ll have so much equity built up after 10 years that the difference in interest rate when you refinance will be inconsequential. 

Plan on refinancing with a fixed instead of floating rate when the time comes if you’re still worried about it. 

@Shane H. some of this is market specific and will depend on how sophisticated/aggressive the advertising company is that someone is negotiating with. For example, in my market, two companies own 95% of the billboards along the interstates. Neither of these companies offers nor agrees to revenue share as part of their leases. So regular base rent escalations is the only way to stay on top of the market.

Quote from @Paul Klei:

I'm presently negotiating a lease to allow a sign to be built on my land. Is there a way to remove or mitigate the sole discretion language that allows them to remove the sign or stop/lower rent? I want to monetize the lease. Are you familiar with how leases are appraised in terms of how they are structured (length, escalation clause, etc)? 

You should absolutely, ALWAYS negotiate rental escalations. The worst case I've seen is a billboard lease signed 25 years ago for just a few hundred dollars annually, with no escalations and no date of termination. Market rate for that billboard now is $5,000/month, and all the current owner gets is a couple hundred bucks and there's nothing he can do about it.

Remove any language that allows them to lower base rent or remove the sign at their own discretion. Always require specific terms of notice and a defined lease length. Require additional compensation if they want to extend. Do not let them extend indefinitley. DO NOT GRANT THEM AN EASEMENT.

Regarding your question, are you referring to appraising the lease independent of the real property that it's attached to? If so, I don't have any experience with that. But I would imagine the more favorable terms for the property owner, the more valuable the lease will be.