Fully occupied. Every tenant below market.
Anchor lease expires in two years.
What’s your offer?
Here’s a deal like the ones I give my students to analyze — somewhat simplified, but should still be challenging. Curious what you’d pay for this property and how you’d get there.
The deal:
Four-unit retail strip, 6,000 SF total, fully occupied
Five-year hold
Each unit: 1,500 SF
Market rent: $24/SF
Rent roll:
— Unit A (coffee shop): $18/SF — lease expires Year 2
— Unit B (insurance): $22/SF — 3 years remaining
— Unit C (nail salon): $20/SF — month-to-month after Year 2
— Unit D (tax preparer): $21/SF — through Year 4
Operating expenses (Year 1):
— Taxes: $12,000
— Insurance: $4,500
— CAM: $6,500
— Management: 8% of EGI
— Growth: 2.5% annually
CapEx reserve: $3,000 contributed at closing, recovered at resale
Financing:
— 65% LTV, 6.75% interest, 20-year amortization
— Closing costs: 1.5% of purchase price
Exit:
— 7.5% cap on Year 5 NOI
— 5% cost of sale
Market context:
— Comparable properties trading at 7–8% caps
— Stable employment base, no meaningful new supply
The seller hasn’t named a price. That’s your job.
What would you offer — and why?
At what price do the return metrics — IRR, equity multiple, Year 1 DSCR, and year 1 cash-on-cash — tell a story you’d be comfortable defending?
I’ll post my model and walk through the numbers in a few days.
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