Lease Purchasing A Warehouse Way Below Market Value And Am Seeking Advice On The Best Exit Strategy
Hello All,
I have just entered into a lease purchase agreement for a commercial warehouse. The owner no longer lives in the state and just wanted to get rid of it.
The warehouse appraised for almost $5,000,000 in 2000, since then there have been no damages but instead various improvements.
It is over 125,000 square feet on over 20 acres.
I got a good deal and wanted to pass on a good deal to an investor but am not sure which one would be the wiser way to go.
Some ideas are as follows:
Lease-Purchase it to a tenant / buyer for $2,999,999.
Have them pay $3.50 per square foot (which is obviously dirt cheap considering they typically rent for over 8 times that), on a 3 year lease. It would be a Triple Net.
Another alternative was to sell it for $3.900,000 Cash with $500,000 back at close.
Does any of these sound like a plan?
If so, let me know the best way to market it.
If not, give me your advice. It would be very much appreciated!
Thanks
Some thoughts:
Have you talked to a commercial broker that specializes in this type of space to see what the demand is? and market data.
Do you really want to sell or is lease option, where you might be stuck acceptable.
I think conventional wisdom is to rent stabilize the property, and then sell it a a cheap capitalization rate.
I am looking at some REO office space, and am budgeting a 7% cap, whereas the market is 6-6.5 which gives me a fudge factor.