Would you?

[easywash]

We have been approached by a very large mall in our area.

They have offered to lease us a piece of property at a WAY UNDER MARKET value.

The pad is right next to a new Target store that is opening up.

The Landlord will commit $300K- towards the building costs.

We are considering a 2-3 Bay Auto or a 80ft Tunell.

There are a lack of carwash facilities in the areas.

The Down Side.

The maximum lease term is 10Yrs. and the mall will likely be re-developed within 15 yrs.

Would you do it?

 

[Waxman]

No I would not.

It may or may not be profitable.

But you do not walk away with anything after 10 years, except your profit (or loss).

 

[Jimmy Buffett]

I don't know about the rest of you guys but for me the first 10 years are for the bank without much left for me. I'm going to spend the second 10 years trying to pay my fair share to the IRS because I've been told that it's the right thing to do. If I live longer than that I might get some for myself.

 

[Reds]

I have done multiple ground leases and leases of entire facility when i was in the fast food biz. Always a 20 yr. term with either a 10 or 20 year option to renew. The problem is determining renewal rates that far in advance. A minimum fixed rent and then a % of sales on top of that was a common approach. Is this a triple net lease offer? With a 300k advance and no land to purchase you could get in with a minimal investment. But 10 yrs is way too short. And you have a whole lot of numbers to run to determine if you can get a decent return. Make sure that you look at the down side risk when running your numbers.

 

[easywash]

Thanks for the feedback.

I have done multiple ground leases and leases of entire facility when i was in the fast food biz. Always a 20 yr. term with either a 10 or 20 year option to renew. The problem is determining renewal rates that far in advance. A minimum fixed rent and then a % of sales on top of that was a common approach. Is this a triple net lease offer? With a 300k advance and no land to purchase you could get in with a minimal investment. But 10 yrs is way too short. And you have a whole lot of numbers to run to determine if you can get a decent return. Make sure that you look at the down side risk when running your numbers.

This is not a triple net lease offer. The entire property is located in the city and it's massive. I've heard it's worth as much at $500M.

It's basically a pad rental on a 10 year term.

They approached us because none of the traditional "Pad" type business would do it because of the short term. No restaurants, no fast food.

I suspect we will probably to back to them and propose they cover 100% of the build out and some form of base rent (low) with a % Rent. Or we just run it for them for a fee.

I am not prepared to put my money on the line for such a short lease term.

It's the only way I see it working for us.