Would you buy this warehouse?
A fictional 20,000 SF industrial building, four 5,000 SF bays. Work through the acquisition decision using the Playbook assumptions. Change the offer and vacancy months to see the impact.
Seller's presentation
Asking price $2,400,000 · seller-reported NOI $210,000 · advertised cap 8.75%. Bay D expires at closing.
Four bays each pay $60,000 annual base rent and $7,500 annual recoveries. Nonrecurring insurance settlement: $12,000.
Buyer's adjustments
Taxes and insurance $48,000; repairs and other operating expenses $24,000; annual management $18,000.
TI $45,000; leasing commission $15,000; liquidity $75,000; closing costs 3% of price. Target normalized cap 8%; equity budget $1,050,000.
Test your offer
Illustrative lender: 65% LTV, 1.25× minimum DSCR, 10% minimum debt yield, 9% annual debt constant. Loan is limited by the most restrictive test.
Before deciding
Which three documents or conditions would you require before proceeding? What would cause you to walk away?