Seasoning Rent Before Exit
I am working on a large office/warehouse space that I’m subdividing and, with walls, I am leasing to some regional businesses. The idea is that the exit would be from selling a building 100% leased out to credit worthy occupants. How long of a period of time should I wait for the rent rolls to show payment stability before I could offer the listing on the market? Do Buyers that look at CAP Rates demand a full three years of rental history or would it be possible to sell this type of building after only, say, six months of rental history, if the lease extends 3 to 5 years down the road?
[{"id": "fepk328", "text": "From personal experience a lot of that depends on the tenant and their financials.\n\nIf you are leasing to a multi-billion dollar company it\u2019s going to be far more attractive than a mom and pop shop no matter the lease duration.\n\nYou can always find a buyer though, just a question of whether or not it\u2019s enough $.", "replies": [{"id": "fepwxf3", "text": "Mmm, this is a great answer. Thank you.", "replies": [], "depth": 2}], "depth": 1}, {"id": "feqlfsq", "text": "Sell it as soon as you have signed leases if you are looking to exit.  Seasoning makes no difference.", "replies": [{"id": "ff1j69i", "text": "Agreed, seasoning might make sense with non investment grade tenants in order to show that they are paying rent. But with investment grade tenants that\u2019s basically a given so no purpose to season them.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fev2ksw", "text": "They will still low ball and offer you 35% under ask so it's ok relax", "replies": [], "depth": 1}, {"id": "fev2rre", "text": "The plan you are proposing seems likely to involve leases that are not 100% NNN if the space will be subdivided into a bunch of smaller units, so true NOI won\u2019t be verifiable without historical information. \n\nYou can still put the property on the market simply with executed leases, but potential buyers may err on the side of caution when estimating expenses, and thus submit lower bids.", "replies": [{"id": "ff3026q", "text": "If it\u2019s 100% leased to multiple tenants, and they are all NNN, then it doesn\u2019t make a difference.", "replies": [], "depth": 2}], "depth": 1}]