Friday, June 29, 2007

Shopping Center Financing Challenges

It is wise to have a lender take a good look at a retail property before making an offer on it. Even in premier city locations, let's say San Jose, there will be differences in the rates a lender will charge depending on the neighborhood. Is this "red-lining" - no such thing in commercial. Neighborhoods are ranked, A, B, C... and a lender will add costs to the margin depending on its lower grade. This can be shocking once you are in escrow and committed to close the deal. Of course, condition, age, tenant profile, lease terms, and more will also affect the rate a lender is willing to offer. I highly suggest having a lender who is willing to give you quick commitments when shopping for a center. Does anyone wonder why many deals fall apart, especially on high cap rate deals?

Thursday, June 21, 2007

Starbucks NNN in San Jose

Rare I tell you, rare. Expensive too, this is not so rare.
Great Willow Glen-ish location at the corner of Leigh and Curtner. This location will do well always. Starbucks and Wireless Toyz, both with firm leases till mid 2011 only. Starbucks does not pay increased property taxes till 2011, if they decide to stay. Wireless pays 3% rent increases every year, then flat in both 5 year options after the first increase. This structure in confusing. Must use CCIM spreadsheet, Must use CCIM spread...
$670 per foot, 4.8% Cap Rate, 8 years old, $2,198,000 price.
When you buy a strip center, you buy the leases. If these leases were structured better, this center would fly off the shelves. Then again, it's Starbucks in San Jose. I could be wrong.

Tuesday, June 19, 2007

Mexico - The Perfect Storm

Here's a great idea brought up at the Intero Mexico kickoff: Being that:
1. Mexico real estate is now available to be purchased by US citizens via the "fidecomiso"
2. Reverse mortgages are becoming very popular with people over 62
3. The baby boomers want to be active in their later years
4. And finally, passive rental income is always nice:

There will be a good trend of retirees who tap their equity via a reverse mortgage (no monthly payments) to pay for a vacation condo in Mexico (all cash) and then enjoy the benefits of a place to play AND rental income too.


I'm calling my mother right now.