Retail Investment Properties

A Gross Lease is a lease in which the tenant pays a flat sum for rent out of which the Landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.

In addition, there are also Ground Leases, where the Tenant is responsible for the permits, rezoning, planning, construction, taxes, insurance, utilities, maintenance, and any improvements built by the tenant, like a restaurant, fast food, or retail building; and these improvements revert to the Landlord at the end of the lease. Because all of the costs are usually covered by the Tenant, and the anticipated appreciation with the construction of the improvements, Ground Lease Investment Properties are usually offered at lower capitalization rates.

Capitalization Rates are formed by subtracting any operating costs of the landlord, subtracted by the rents paid, giving a Net Operating Income to the landlord, which is divided by the sales price of the investment property.

A Single Tenant NNN investment property gives you full (fee-simple) ownership of a free-standing, commercial property, which is usually fully leased to a investment grade retail tenant like Rite Aid, Walgreens, etc., on a long-term basis, providing you with a stable, long-term cash flow. There are many Single Tenant NNN (no Landlord responsibilities) and Multi-Tenant Triple-Net Retail properties (shopping centers, strip malls, or two or more tenants) available nationwide, and at varying capitalization rates.

Cap rate investments can range 5 to 9%, dependent on the quality of the tenant, i.e. their credit rating and number of locations / stores that the Tenant has. Typically, a franchisee will have five or more locations, making for a stronger tenant and long-term investment. The better the Tenant, the length of the lease, the net operating income (NOI), rent increases, and the current vacancy rate for the location of the investment; help to provide profitable returns, and stabilized income from the rents paid to the investor(s), and the increase in property values (supply and demand set how the value goes up or down usually, and with most retail investment properties, the tenant has already made all the studies possible to make sure that is the best location for their business) and making for a strong long-term investment for you the investor.

Also, NNN properties make for great 1031 Tax-Deferred exchanges, where the owner defers the taxes or capital gains on a sale of "like kind" property, and put that towards the purchase of the new NNN property.

Contact us if you are looking to purchase an investment property, so that we can help navigate the transaction. Our hallmark is service and hard work, and placing the interests of our clients first! You are our priority from the moment you contact us! We respond to your inquiries and requirements immediately. We will:

Evaluate the rent roll (rents paid by tenants and lease terms),
Negotiate offers, terms, study period, and prepare non biding letters of intent (LOI),
Help with the loan process and locating commercial lenders (typically lenders like investment properties based off of the rent roll),
Evaluate the market where the property is located,
Check the possibility of re-letting the property if necessary,
Compare the price of the building when vacant and when compared with having a tenant paying rent,
How much the rent increases are,
Evaluate the Cash On Cash Return (essentially a simple interest calculation, calculated as: Cash-On-Cash Return = Annual Dollar Income (NOI to the owner before income taxes) / Total Dollar Investment (down payment), which is the calculation that determines the cash income on the cash invested),
Find out if there are any options to the lease,
Review the lease in its entirety, notifying you of any possible concerns,
Request estoppel certificate from the tenant / landlord, providing a true and correct copy of the Lease to you the investor, certifying that the Lease is in full force and effect with or without modification as the case may be, the amount (if any) of Tenant's Prepaid Rent and Deposit, and that the current Landlord has performed all of its obligations under the Lease and that there are no defenses, counterclaims, deductions, offsets or other excuses for Tenants non-performance under this Lease, and any other fact requested by you the purchaser.
Find out if there are any landlord responsibilities, including roof and structure,
Monitor market trends to find the average of how much the property value has gone up or down over the years,
Evaluate when the building and roof was constructed and evaluate depreciation when compared to the length of the lease,
Evaluate what the current rental rates are for the market and for similar buildings and main road visibility / locations, and
Evaluate if this is a value added property; which is where the building has the possibility of being renovated / expanded to allow more tenants or more space for the current tenant to lease, or if the rent that the tenant is currently paying is below market and is a short-term lease, seeing if vacancy rates are low, and if the tenant is stable, credit worthy, been in business a longtime, and wants to stay at its present location, due to customer familiarity, traffic count, visibility, etc., which would mean the tenant would stay after the current lease ends, and will usually pay current market rates (also checking the lease for any conditions related to rental rates increases, usually a third party is brought in to evaluate what the current market rental rates are), so if the property is currently at a 6% cap based off of current rents, at the end of the lease, that 6% cap could easily become an 8 or 9% cap or higher. In any case, a value added property is a property that has potential to increase the net operating income in a short period of time, which in turn would increase the buyer's return on the investment; and
We will work exclusively for you, as our client, assisting with the entire buying process, from locating, evaluating, and negotiating on your behalf.

Please request more information by calling us directly at (703) 675-7278 or Saul@PotomacCP.com , we look forward to hearing from you.

cell: (703) 675-7278
office: (703) 752-3700
fax: (703) 752-3701
e-mail: Saul@PotomacCP.com