Wondering about a value add property: or should I stay in my lane?
UPDATE: I finally got a hold of the listing broker and turns out its a leasehold.  So imma pass.

But thanks to all who responded.



I am a personal investor who has exposure to direct STNL properties and small personal/professional multimember LLCs. 

Found a listing for a property with value-add potential or a covered land play. Its a 6000 sq ft building with a corporate tenant that has over 10 yrs left on its primary lease. The parent corporation however I dont think will be around that long as Amazon is eating their lunch. The cap rate reflects this and is over 7%. In addition, price/sqft is below $300. 

Property is just under 1 acre, located on a hard lighted corner, with its own turning lane and ingress on busy street (over 35k VPD) in a college town/state capital. I suspect the tenant will leave in who know, 3 yrs? 1 yr? 7yrs? Either the parent company will enter bankruptcy or restructure their debt. 

I see a lot of potential here. I would pay cash and collect checks for as long as they pay me. When they leave would need retenant it. May take a while esp if prolonged recession I imagine. 

Long story: I have no experience doing this. Im not a developer, just a regular doc without leasing contacts. 
How painful and stupid is my plan? I don't know what tenants would work with 6000 sqft, if I could do a drive through, could I split it, etc etc. I'm actually excited about this opportunity, but wondering if there are consultants or brokers would could move me through the whole process, not just acquisition. I havent committed to doing this, but am considering it more seriously than i thought.
[{"id": "ilrhr1c", "text": "I also own properties personally.  Sounds like this is a retail zoned building?  But in a good location?\n\nI'm just scared of retail.  I have friends still investing in it and doing fine.  I prefer smaller industrial properties, like under 20,000 sf.\n\nThere will always be a need for auto mechanics, contractors of all kinds, cabinet shops, paint booths, etc etc. Smaller bay industrial (like a 10,000 sf building divided into 3 spaces) is always in need.\n\nThat being said, you know the area you're investing in.  If you believe in it and believe in that building, maybe it'll work out great for you.  I would be scared of having to re-tenant it.  But maybe that location will attract a fresh tenant.\n\nGood luck!", "replies": [{"id": "ilrjr1j", "text": "See, I feel more comfortable with retail than industrial because at the end of the day, we are all consumers and have more of an understanding of what other consumers are looking for in a retail site (is the parking good? How convenient is it to get in and out of? Etc). \n\nWhereas industrial I'm clueless. I wish I knew more about that space because you are correct about its stability. I just lack intuition about specific properties and therefore stay away.\n\nYour right about retenanting. I figure I have the cash to weather out the retenancy period for taxes, insurance. That doesnt scare me as much as just not knowing what realistically could go there and what the TI might look like, etc. 6000 sqft is kinda a no man's land.", "replies": [{"id": "ilrqjwy", "text": "Well then perhaps a local broker would be able to help you get an idea of how likely that location is to be popular for the next tenant.  And as you say since you're paying cash it's not going to put you under if you have to wait 6 months for a tenant.\n\nFor industrial, the closer into town the better. I personally like ones that have a decent amount of outdoor storage with them. Even if the tenant doesn't need the outdoor storage you can at least slots for semi trucks, contractor trucks and trailers, etc for like $150 a month.  If you were interested in looking at industrial that's probably another thing that a local broker could help you with to know what's popular in your area.\n\nGood luck!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ilrwvaz", "text": "Adding a Drive thru definitely adds value but some jurisdictions are very tough to get those through zoning variance. What state are you in? I once went through a multi year, several $100k battle to get a variance to add a drive thru for a QSR pad and ended up walking away.\n\nSounds like you\u2019re comfortable with the binary risk that comes with STNLs, so you might want to get it tied up and then find a JV partner who has experience with the tenanting side.\n\nReach out to the major leasing brokers in the area - they\u2019ll pitch you on what tenants they rep and who has demand. College town / state capital should have enough demand drivers for national retailers. 6,000 sf is a good sized box. You might also look into micro fulfillment - if you can get a last mile logistics operator in there, you\u2019d be sitting on a goldmine.\n\nIf you\u2019re looking to build your network in the retail space, you should be going to conferences like ICSC.", "replies": [{"id": "ilryzhb", "text": "Thanks for response.\n\nYour flair is \"investor\" so I assume you are approaching this as someone 'outside' the industry? Do you recommend ICSC for non-institutional personal investors?\n\nI might reach out to a couple local leasing brokers based on your and axemans advice. Will just have to understand they maybe pitching me their services and will have shift through that to get to the useful information.", "replies": [{"id": "ilrzuc3", "text": "I work in private equity real estate so we look at larger institutional assets - office towers, apartments complexes etc\n\nI don\u2019t do much on the personal side anymore now that I have access to our funds - offers me a better risk adjusted return with diversification, carried interest, etc.\n\nIn my prior life I developed STNL for a QSR operator so I have alot of experience negotiating retail leases, dealing with entitlements, building pads etc. I had a construction management business as well.\n\nIcsc is good for networking in retail. You mostly find service providers, shopping center owners, national retail reps etc.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ilscya5", "text": "Highly recommend you create a basic proforma. What\u2019s the market rental rate, plug in average operating expenses, debt service, and compute your cash on cash return. Figure out the exit cap rate and see in what valuation you can get out of the deal. \n\nYou should 100% get out of your comfort zone try something new. Yolo baby", "replies": [], "depth": 1}, {"id": "ilwaa5d", "text": "Value-add is a stretch here really, but that is just semantics.  It's a NNN (right?) buy that you expect to have to re-tenant at some point. \n\nIf it's a cash buy then your risk of zeroing out is nonexistent so go for it IMO. I would try to push the offer into the 7.5 to 8 range if you can, obviously.  Hard offer, cash closing with no lender should move to the top of the stack instantly if others have a financing contingency, especially in the current environment. \n\nDon't expect free work from people who know what they are doing in the space though. After you buy it, talk with all the retail tenant rep brokers active in the city. You will have time to find one you trust after closing and before the national tenant goes belly up. Talk to all of them as the who's who shifts over time like everything else. You will find one to market and lease it for you when the time comes and you will get ideas and information along the way. Save or have dry powder ready for TI when you re-tenant it. \n\nDefinitely look at the land price per foot for similar hard corners in today's market before you buy, hopefully that will boost your confidence in the underlying value of the dirt.", "replies": [], "depth": 1}, {"id": "ilwvtc2", "text": "You'll definitely want to have that lease reviewed and make sure of your rights in the tenants' bankruptcy if that's what you expect. I saw a number to NNN investors get beat up when Mattress Firm declared bankruptcy because they didn't have any redevelopment plans/capability and took significantly renegotiated leases rather than have the stores close and need to retenant.", "replies": [], "depth": 1}]