What To Look For When Buying Shopping Centers And Multi-Tenant Retail Investment Properties
[{"id": "dtz5e66", "text": "1. Dont buy if largest tenant has lease expiration coming up in next 5 years.\n2. Dont buy if value is artificially propped up by one tenant who pays far above market and may vacate\n3. Make sure there isnt a large gla% rollover around debt maturity \n4. Dont buy an enclosed mall", "replies": [{"id": "dtz5ekl", "text": "Havent read article, just my opinion.", "replies": [], "depth": 2}, {"id": "dtz8cdg", "text": "What's wrong with enclosed malls? No longer popular?", "replies": [{"id": "dtzspcs", "text": "Declining sales and traffic at all but the high end malls. They are in a downward spiral. ", "replies": [], "depth": 3}], "depth": 2}, {"id": "dtzlszu", "text": "I would argue with you on the enclosed mall.  Yes, several enclosed malls are doing poorly, but some are doing amazing.  Just saying an enclosed mall is a bad buy is bad advice.  \n\nPoints 2 and 3 are valid, but point 1 could be an opportunity to create value.  If the largest tenant is expiring in 5 years, you can pay a higher cap as there's more risk.  In addition, if you're going to diversify the tenant mix, the anchor is a good place to start.  ", "replies": [{"id": "dtzz0fp", "text": "Fair, there are some decent enclosed malls in older/suburban/smaller communities. There are exceptions but I think its a good rule of thumb.", "replies": [{"id": "dtzztdy", "text": "I agree it's a good rule of thumb, but also the enclosed malls I'm thinking of are all in large urban areas with millions of people surrounding it.  The difference is that they are the primary retail hub, not secondary or tertiary, and have top tier tenants. \n\nI honestly believe that tenant mix is important behind location, and that if you have the right offerings through the right tenants, you can become the destination for the area.\n\n", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "dtzlm2z", "text": "It's an ok basic article, but missed one of the biggest things that you need to know, and that is exclusivity and co-tenancy requirements.  All of the things mentioned are important, but if you don't check to see if the leases have exclusivity rights and co-tenancy requirements, you may find many of the suggestions difficult, expensive, or impossible to implement.  \n\nHonestly, the devils in the details, and while this is a decent article, to not even mention that when it comes to retail is pretty bad.  \n", "replies": [{"id": "dtzocgn", "text": "great point - thanks for reminding! I will be making an edit to the post to include. ", "replies": [{"id": "dtzp0gs", "text": "Thank you.  For other types of real estate investment it's all pertinent information, but retail commercial real estate is really a much more complicated beast.  Not extremely difficult per se, but definitely more moving parts due to the nature of the property type.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "du0wd60", "text": "I work commercia real estate specifically retail leasing and sales.  \n\n Knowing the market rents and tenant market cold is key. I see savvy buyers crushing deals all the time because they know a particular  tenant wants to be in certain area.\n\n For example dry cleaner and chinese carry out are month to month then lease whole property to 7-11 now a $1m  property turned into a $2m propery because now you have a long term lease guaranty from a billion dollar company. \n\n7-11 tenant buildings sell at 5 % cap rate.\n\nAll the value is in the leases the more knowledge you have about leases the better.   Look for leverage in existing tenants.\n\nLearn about triple net leases.  \n\n", "replies": [], "depth": 1}]