All Forum Posts by: Tom Nguyen

Hi Tom,

First off, Greenville is a fantastic market for RE in general as it's experience a lot of growth. Having said that retail is one of the markets that has been hit harder by the pandemic and by ecommerce (accelerated 5-10 years by the pandemic). It's one of the riskier assets because the future is unknown. 

If I were buying a strip center, I would want a steep discount and to ensure that it's a great location. I would expect service based businesses to still need retail locations. The only thing that would change that is if it has very strong tenants on a NNN lease.

@Tom Nguyen nationals/regionals are your household name tenants.  Again think Great Clips vs ABC Haircuts.  Or T-Mobile Store vs maybe an unbranded cell phone retailer. There are caveats on this since a lot of national brands are franchises.  But then you can look at the lease guarantor to find out if corporate stands behind leases or it is solely the franchisee.  It all comes back to credit strength of the tenant, or guarantor on the lease.  Some franchisees might be in a better position these days than their franchise banner corporation.

Financial review just means P&L review, Capex spending, rent roll and aging report, etc.

Per the phase 1, Lawrence brings up a good point that you will want to review all historical info available.  Some leases get recorded, so that can help uncover any former dry cleaners.  The seller, hopefully, owned a long time, so will have historic information and a phase 1, potentially phase 2, performed when they acquired asset.  This area is a balance of risk/reward.  You can always proactively perform a Phase 2 regardless of any finding in the Phase 1, but that is a lot of cost to potentially find nothing.  Partners Group does PCA and Phase 1/Phase 2, and can be a good resource to lean on regarding understanding the process.

find out if gas station or dry cleaner ever operated at the strip. 75%-80% of dry cleaners have suffered leaks and resulted in contamination. 

@Tom Nguyen, admittedly it has been a while since I have worked in retail area firsthand.  

Cap rates will depend on specific submarket, location, tenant mix, etc of the property,  I would call some local retail brokers to get their opinions.  Clearly, a property with poor visibility filled with a lot of mom and pop, non-credit tenants will trade at a higher cap rate than the primary retail corner with all national credit tenants.

Your phase 1 is important, and may require a phase 2, if there is any indication of environmental issues.  Property condition assessment, full lease audit and estoppels are all required. You will clearly need to do a full financial review from seller, and market analysis for rent and demand dynamics.

I think there are some great opportunities in retail, especially in these essentials focused strips.