To Good Not to Share
I had to share this. I have been talking to a shopping center owner about selling his strip center in SoCal. I just got the rent roll and operating statement. On the rent roll is an additional 25% of GLA (gross leasable area) that is not even built yet! Better yet, they believe they should be given credit for the potential income that will be generated from this vapor space! All I can say is wow (shakes head).
This kind of proforma valuation may have made it past a few sucker’s desks in 2003-2007 but last time I checked, investors are not really assigning much value to future development opportunities. Actually, investors are not even giving credit for space that is built if it is not leased. Buying on true, in-place actual income is the only way deals are going down. If your center is 50% vacant, you are selling it based upon 50% of the potential income stream. Period.
We had a client try something like this about a year ago with excess land on a new retail site. It made me scratch my head in wonder then and reading about someone trying this in today's new realty reality is amazing indeed. Were you able to make the owner see reason?
I didn't even bother. If I have someone interested in the property, we will write an offer at a reasonable value and go from there. I'm not holding my breath though.